方大Ｂ(200055)2007年年度报告（英文版）

方大集团股份有限公司 CHINA FANGDA GROUP CO., LTD. Annual Report 2007 目 录 I. Company Profile ........................................................................................................................................... 2 II. Financial Highlight ..................................................................................................................................... 3 III. Particulars About the Capital Share and Shareholders ............................................................................. 6 IV. Particulars about the Directors, Supervisors, Senior Management and Employees ................................ 10 V. Administrative Structure............................................................................................................................. 13 VI. Particulars about the Shareholders’ Meeting ........................................................................................... 19 VII. Report of the Board of Directors............................................................................................................. 21 VIII. Report of the Supervisory Committee .................................................................................................... 31 IX. Significant Events ..................................................................................................................................... 32 X. Financial Report........................................................................................................................................ 37 XI. Documents For Reference ..................................................................................................................... 37 Important Statement The Board of Directors and the directors of the Company guarantee that there are no significant omissions, fictitious or misleading statements carried in the Report and we will accept individual and joint responsibilities for the truthfulness, accuracy and completeness of the Report. This report has been examined and adopted by the 25th meeting of the 4th term of Board. Mr. Wen Simei, the independent director absent the meeting for business engagement, he entrusted independent director Zhen Xueding to exercise his right of voting and issued the independent opinions. The other directors all presented the meeting. This report is prepared both in English and Chinese. When there is any conflict in interpreting, the Chinese version shall prevail. Mr. Xiong Jianming, the Chairman, and Mr. Lin Kebing, the Financial Principal hereby declares that: The financial statements carried in this annual report are of verity and complete. 第 1 页 I. Company Profile 1. Legal Name of the Company in Chinese and English In Chinese: 方大集团股份有限公司 （abbreviation：方大集团） In English: CHINA FANGDA GROUP CO., LTD. （abbreviation：CFDC ） 2. Legal Representative: Mr. Xiong Jianming 3. Secretary of the Board: Mr. Zhou Zhigang Securities affair liaison: Ms. Cao Naisi Address: Fangda Town, Xili Longjing, Nanshan District, Shenzhen, PRC Post code: 518055 Tel: 86(755) 26788571 ext. 6622 Fax: 86(755) 26788353 Email: zqb@fangda.com 4. Registered Address of the Company: Fangda Building, Kejinan 12th Avenue, High-tech Zone, Shenzhen, PR China. Post code: 518057 Head office: Technology Building, Fangda Town, Xili Longjing, Nanshan District, Shenzhen, PRC Post code: 518055 Website: http://www.fangda.com Email: fd@fangda.com 5. Official Medias of Information Disclosure China Securities Journal, Security Times, Hong Kong Commercial Daily Place where Annual Reports are available: Secretary Office of the Board of Directors. Website assigned by China Securities Regulatory Commission for the disclosing of Annual Report: http://www.cninfo.com.cn 6. Abbreviations and Codes of the Stock and the Stock Exchange Where Listed A Stock: Fangda A 000055 Shenzhen Stock Exchange B Stock: Fangda B 200055 Shenzhen Stock Exchange 7. Miscellaneous Information of the Company Initial registration date and place: December 13th, 1995, Shenzhen Bureau of Industry & Commerce Administration Business license number: Qi-he-yue-shen-zong-zi No. 107938 Tax registration number: Guo-shui-shen-zi No. 440301192448580 Di-shui-shen-zi No.440305192448589 Public accountants invited by the Company: Ascenda Certified Public Accountants Office address: 1201-1204 A12/F Investment Plaza, No.27 Jinrong Street, Xicheng District, Beijing 第 2 页 II. Financial Highlight 1. Major accounting data of 2007 (in RMB) Items Amount Operation profit 5,976,620.54 Total profit 23,850,523.77 Net profit attributable to the shareholders of the listed company 24,386,023.62 Net profit attributable to the owners of the PLC after deducting -32,626,195.59 of non-recurring gains/losses Cash flow generated by business operation, net 81,895,449.43 Note: The total of non-recurring incomes was of RMB57.0122 million. The details are as followings: Non-recurring gain and loss items Amount Gain/loss of non-current assets 55,761.72 Government subsidy counted into current gain/loss account 11,756,035.47 Gains from fluctuation of investment property fair value 42,321,760.27 Gain/loss from debt reorganization 344,176.42 Carrying back of welfare payable balance 1,360,833.10 Gains from subscription of new stocks and funds 2,069,943.32 Net amount of other non-operational gain/expenses other 4,027,266.06 than the above Less: Income tax (15%) -1,224,435.76 Minor shareholders’ gain/loss in non-recurring gain/loss -3,699,121.39 Total 57,012,219.21 Items accounted on fair value basis In RMB Yuan Balance at the Balance at the end Change of current Influence on Projects beginning of term of term term current profit Disposable 16,503,989.67 81,678,821.05 65,174,831.38 0 financial asset Property investment 223,029,458.35 265,461,218.62 42,431,760.27 42,173,134.77 Total 239,533,448.02 347,140,039.67 107,606,591.65 42,173,134.77 2. Influence of adjustment on net profit and net asset according to the IAS (not audited) In RMB Domestic accounting standard Overseas accounting standard: Net profit 24,386,023.62 -18,095,736.65 Net asset 581,919,810.07 589,343,586.44 第 3 页 Statement about the According to the IAS, gains from change of fair value of investment property diversity are accounted into previous years 3. Major financial data and accounting indices for latest 3 years In RMB Increase/decrease Year 2007 Year 2006 Year 2005 (%) Not adjusted Adjusted Adjusted Not adjusted Adjusted Turnover 640,246,885.64 702,817,644.34 702,817,644.34 -8.90% 634,486,504.53 634,486,504.53 Total profit 23,850,523.77 7,187,475.63 20,178,171.35 18.20% -58,461,648.42 -51,295,531.53 Net profit attributable to the 24,386,023.62 7,986,812.14 20,610,993.31 18.32% -58,365,528.85 -51,199,411.96 shareholders of the listed company Net profit after deducting of non-recurring gain/loss attributable to -32,626,195.59 -12,915,565.01 -5,749,448.12 467.47% -77,160,203.83 -69,994,086.94 the shareholders of the listed company Cash flow generated by 81,895,449.43 81,321,516.65 81,321,516.65 0.71% -26,849,352.82 -26,849,352.82 business operation, net Basic gains per 0.0629 0.0226 0.0584 7.71% -0.1969 -0.1727 share Diluted gains 0.0629 0.0226 0.0584 7.71% -0.1969 -0.1727 per share Basic earning per share after deducting of -0.08 -0.0366 -0.02 300.00% -0.2603 -0.24 non-recurring gains/losses Net income on asset, fully 4.19% 1.88% 4.24% -0.05% -13.99% -11.01% diluted Net income on 4.59% 1.90% 4.82% -0.23% -13.11% -10.44% asset, weighted Net income on asset, fully diluted and -5.61% -3.04% -1.18% -4.43% -18.50% -15.05% deducted non-recurring gain/loss Net income on asset, weighted and deducted -6.15% -3.07% -1.34% -4.81% -17.33% -14.27% non-recurring gain/loss Net Cash flow per share generated by 0.21 0.23 0.23 -8.70% -0.091 -0.09 business operation Increase/decrease End of 2007 End of 2006 End of 2005 (%) Not adjusted Adjusted Adjusted Not adjusted Adjusted Gross Assets 1,316,903,872.37 1,125,006,290.66 1,185,591,408.67 11.08% 1,201,275,986.46 1,243,995,094.72 Shareholders’ equity attributable to 581,919,810.07 425,135,885.04 485,544,759.85 19.85% 417,069,075.26 464,933,766.54 shareholders of the Company Net asset per share attributable to 1.50 1.21 1.38 8.70% 1.41 1.57 shareholders of the Company 4. According to “Information Disclosure Criteria of PLCs No. 9” issued 第 4 页 by China Securities Regulatory Commission, the Company adopts full-am ortizing basis and weighted-average basis in accounting of the net incom e on assets andearning per share of 2007 Net return on equity (%) Earnings per share (yuan/share) On full Basic gains per amortizing weighted share-{}- Diluted gains Items basis average per share Net profit attributable to common shareholders 4.19% 4.59% 0.0629 0.0629 of the Company Net profit attributable to the common owners of the PLC after deducting of non-recurring -5.61% -6.15% -0.08 -0.08 gains/losses 5. Change of owners’ equities in 2007 (in shares and RMB yuan) Difference in Statutory Total of foreign Items Share capital Capital reserves Surplus reserves public Retained profit shareholders’ currency welfare equity exchange Beginning 352,716,000 108,881,471.81 35,402,732.12 0 -11,215,403.21 -240,040.87 485,544,759.85 of term Increased 35,271,600 71,748,985.73 3,008,177.58 0 56,408,235.88 240,040.87 166,677,040.06 this term Decreased 0 35,271,600 32,022,212.26 0 3,008,177.58 0 70,301,989.84 this term At the end 387,987,600 145,358,857.54 6,388,697.44 0 42,184,655.09 0 581,919,810.07 of term Cause of Increased by Capitalizing of Providing of -- Providing of Fluctuate of -- change capital capital reserves surplus reserves surplus reserves exchange reserves and fluctuate of and makeup of and makeup of rate sellable financial previous losses previous losses asset fair value 第 5 页 III. Particulars About the Capital Share and Shareholders 1. Change of share capital In shares Before the change Changed (+,-) After the change Issuing Transferred Proportio Bonus Amount of new from Others Sub-total Amount Proportion n shares shares reserves I. Shares with conditional 109,110,775 30.93% 7,191,918 -37,219,095 -30,027,177 79,083,598 20.38% subscription 1. State-owned shares 2. State-owned legal person shares 3. Other domestic shares 109,110,775 30.93% 7,191,918 -37,219,095 -30,027,177 79,083,598 20.38% Incl. Non-government domestic legal person 109,032,000 30.91% 7,184,040 -37,191,600 -30,007,560 79,024,440 20.37% shares Domestic natural 78,775 0.02% 7,878 -27,495 -19,617 59,158 0.01% person shares 4. Share held by foreign investors Incl. Shares held by foreign legal persons Foreign natural person shares II. Shares with 243,605,225 69.07% 28,079,682 37,219,095 65,298,777 308,904,002 79.62% unconditional subscription 1. Common shares in 70,617,305 20.02% 10,780,890 37,219,095 47,999,985 118,617,290 30.57% RMB 2. Foreign shares in 172,987,920 49.05% 17,298,792 0 17,298,792 190,286,712 49.05% domestic market 3. Foreign shares in overseas market 4. Others III. Total of capital shares 352,716,000 100.00% 35,271,600 0 35,271,600 387,987,600 100.00% Change of conditional shares In shares Conditional Conditional Name of the Released Increased Date of shares at shares at end of Reason of condition shareholder this year this year releasing beginning of year year Restriction period not April 23, Banglin 60,000,000 17,635,800 4,236,420 46,600,620 expired yet 2007 Shenzhen Shilihe Restriction period not April 23, Investment Co., 47,112,000 17,635,800 2,947,620 32,423,820 expired yet 2007 Ltd. Shenzhen Shekou April 23, Yu’er Industrial 1,920,000 1,920,000 0 0 ----- 2007 Co., Ltd. May 21, Xiong Jianming 53,022 14,581 5,302 43,743 Shares held by directors 2007 May 21, Wang Shengguo 18,684 5,138 1,869 15,415 Shares held by directors 2007 Shares held by director and has quit from the April 26, Zhu Weiping 7,069 7,776 707 0 position for half year in 2007 the report term Total 109,110,775 37,219,095 7,191,918 79,083,598 － － 第 6 页 2. Share placing and listing (1) As of the end of report term, the Company issued no shares in the market in the past 3 years. (2) The Company’s total capital shares and shareholding structure has changed due to capitalizing of common reserves for year 2006, releasing of the first lot of conditional shares, and partially frozen of shares held by directors, supervisors, and senior executives. The total shares has increased from 352,716,000 up to 387,987,600 shares. The conditional shares of 109,110,775 and unconditional shares of 243,605,225 at the beginning of report term have changed to 79,083,598 shares and 308,904,002 shares respectively at the end of report term. (3) No employees’ shares issued in the Company 3. Shareholders and shareholding status (ended December 31st 2007, in shares) 56,575 (including 33,803 A-share holders, and 22,772 B-share holders) at the end of report Total of shareholders term Top 10 Shareholders Name of the Properties of Conditional Share proportion % Total shares Pledged or frozen shareholder shareholder shares Domestic Banglin non-state-owned legal 12.50% 48,480,620 46,600,620 46,600,620 person Domestic Shenzhen Shilihe non-state-owned legal 8.49% 32,923,820 32,423,820 0 Investment Co., Ltd. person Onforce International Overseas legal person 4.95% 19,200,000 0 0 Ltd. Gu Feng Domestic natural person 0.54% 2,097,821 0 N/A Chen Jinbiao Domestic natural person 0.50% 1,949,188 0 N/A Cao Yifan Domestic natural person 0.47% 1,808,620 0 N/A Sun En’ju Domestic natural person 0.36% 1,395,000 0 N/A Zhang Lingyi Domestic natural person 0.23% 898,000 0 N/A Natio Securities Overseas legal person 0.20% 794,929 0 N/A Co.,Ltd. Lu Yineng Domestic natural person 0.20% 788,071 0 N/A Top 10 holders of unconditional shares Name of the shareholder Unconditional shares Category of shares Onforce International Ltd. 19,200,000 B shares Gu Feng 2,097,821 B shares Chen Jinbiao 1,949,188 B shares Banglin 1,880,000 A shares Cao Yifan 1,808,620 B shares Sun En’ju 1,395,000 A shares Zhang Lingyi 898,000 A shares Natio Securities Co.,Ltd. 794,929 B shares Lu Yineng 788,071 B shares Lu Haiyun 778,100 B shares Notes to relationship Among the top 10 shareholders, Banglin and Onforce are under the same controlling or “action in concert” shareholder, therefore they are regarded as related and act-in-concert parties. As for the other among the top ten holders of current shares, the Company has not been informed any situation of related parties or shareholders. concerted operators. 第 7 页 4. Particulars about the controlling shareholder Name of Share Legal Date Registered Business scope the proportion representative incorporated capital shareholder % Industrial investment, 3,000 developing of electronic 222 Banglin 12.50% Chen Jinwu RMB 10 products, technical June 7th thousand consulting, domestic commerce, material trading 5. The investors of Shenzhen Banglin Technologies Development Co., Ltd.- the controlling shareholder of the Company are natural persons, in which Mr. Xiong Jianming, the Chairman of the Company is holding 85% of the shares, thus he’s the substantial controller of the Company. Mr. Xiong Jianming is a resident of Peoples’ Republic of China. He has been the Chairman and President of the Company for the past five years. 6. Neither the controlling shareholder nor the substantial controller of the Company has changed in the report term. 7. Chart of the controlling relationship between the practical controller and the Company Xiong Jianming 85% Shenzhen Banglin Technologies Development Co., Ltd. 12.50% China Fangda Group Co., Ltd. 第 8 页 8. Other legal person shareholders who are holding over 10% of the shares In the report term, no other legal person shareholders who are holding over 10% of the shares other than Shenzhen Banglin Technologies Development Co., Ltd. 9. Amount and condition of top 10 holders of conditional shares In shares Shares with Date when Newly added Name of the No. conditioned trading is tradable Conditions holder subscription allowed shares 2008-04-10 19,399,380 Can’t be traded in 12 months since the launching of 1 Banglin 46,600,620 2009-04-10 27,201,240 non-negotiable shares reconstruction plan; upon Shenzhen 2008-04-10 19,399,380 expiring of the above term, when the former non-negotiable share holders holding above 5% of the Shilihe 2 32,423,820 shares is trading its shares in the market, the number Investment 2009-04-10 13,024,440 of traded shares shall not exceed 5% in 12 months, Co., Ltd. and shall not exceed 10% in 24 months. Note: The share equity restrucuring was accomplished on April 10th 2006 第 9 页 IV. Particulars about the Directors, Supervisors, Senior Management and Employees 1. Particulars about the Directors, Supervisors, and Senior Management (1) Basic Information Shares held Shares Remuneration at the held at Cause of accepted from the Name Position Sex Age Job term beginning of the end change company in report term of term term (RMB0’000) Transferred Xiong Chairman, M 50 2005.5.27-2008.5.27 53,022 58,324 from 43.69 Jianming president reserves Transferred Wang Director, Vice M 49 2005.5.27-2008.5.27 18,684 20,553 from 21.18 Shengguo president reserves Xiong Director M 39 2005.5.27-2008.5.27 0 0 ----- 15.65 Jianwei Director, Zhou 2007.4.9-2008.5.27 Secretary of M 46 0 0 ----- 17.04 Zhigang 2005.5.27-2008.5.27 the Board Zheng Independent M 44 2005.5.27-2008.5.27 0 0 ----- 6.00 Xueding Director Independent Wen Simei M 49 2005.5.27-2008.5.27 0 0 ----- 6.00 Director Dong Independent M 66 2007.4.9-2008.5.27 0 0 ----- 4.50 Likun Director Host of the Yu Guoan Supervisory M 49 2007.4.9-2008.5.27 0 0 ----- 15.77 Committee Song Supervisor M 46 2005.5.27-2008.5.27 0 0 ----- 10.5 Wenqing Zhen Hua Supervisor F 48 2005.5.27-2008.5.27 0 0 ----- 17.07 Yang Vice President M 53 2005.5.27-2008.5.27 0 0 ----- 17.46 Xiaozhuan Li Gang Vice President M 46 2007.3.18-2008.5.27 0 0 ----- 53.00 Total --- --- --- ----- 71,706 78,877 ----- 227.86 Note: The Company hasn’t conducted any share option incentive program. None of the directors, supervisors and executives is holding share options or conditional shares. None of them is getting paid from the shareholding parties or other related parties. 第 10 页 (2) Particulars about directors and supervisors who take jobs in shareholding parties of the Company Get remuneration Name Name of the shareholder Job taken Job term or not Xiong Since Mar. 23 Onforce International Ltd. Chairman No Jianming 2001 Since Sept. 30 Chairman No Wang Shenzhen Shilihe 2006 Shengguo Investment Co., Ltd. General Since August No Manager 24th 2003 Xiong Shenzhen Shilihe Since August Director No Jianwei Investment Co., Ltd. 24th 2003 Zhou Shenzhen Shilihe Since Sept. 30 Director No Zhigang Investment Co., Ltd. 2006 (3) Profiles of the Directors, Supervisors, and Senior Management for the latest five years Mr. Xiong Jianming: DBA; senior engineer; part-time professor of Beijing Institute of Civil Engineering and Architecture and Nanchang University. He was once employed by Jiangxi Provincial Machinery Design Academe, Administration Bureau of Shekou District of Shenzhen government, etc. He’s now assuming Chairman of the Board and President of our company, Deputy to the 10th People’s Congress of Guangdong Province, Deputy to the 3rd People’s Congress of Shenzhen City, member of Commission of Legislative Affairs, Deputy Director of China Construction Metal Structure Association, Deputy Director of Shenzhen League of Industry and Economy, Chief Director of Shenzhen Semiconductor Lighting Industry Commission, and Honorary Chairman of Shenzhen Nanshan Charity Society. Mr. Wang Shengguo: Master degree; Visiting Scholar from University of Essen; senior engineer. He once held such positions as Chief Engineer of Design Institute of the 2nd Heavy Machinery factory of Machinery Industrial Ministry. Mr. Wang is now assuming Director and Vice President of our company. Mr. Xiong Jianwei: MBA. He is now assuming director of our company. Mr. Zhou zhigang: Bachelor degree. He once held such positions as Director of sales headquarter of our company, Deputy Director of Firm Management Dept. of our company. Mr. Zhou is now assuming Director, Secretary of the Board of Directors, Director of Securities Dept. and Director of Advertisement Commission of our company. Mr. Zhen Xueding: Master, senior accountant, CPA. Once worked in Computing School of Jiangxi Finance & Economics University, Accounting Division of Shenzhen Finance Bureau, and Chief Secretary of Shenzhen CPA Association. Currently he is the partnership of Carea Schinda CPA Ltd., People’s Delegate of the 4th People’s Congress of Shenzhen, commissioner of Planning and Budgeting Commission, commissioner of Anti-Crime Commission of Shenzhen Procurator Office, Independent director of the Company. Mr. Wen Simei: Doctor, professor, doctorial course tutor. He once worked as office assistant of Revolutionary Commission of Shimen Bazhong Sichuan, lecturer and deputy professor of South China University of Agriculture, dean of Economics & Trading School of South China University of Agriculture. Currently he is the head of Economical Development Institute of South China University of Agriculture, chief professor of Economics & Trading School, executive commissioner of United Nation Agriculture Study Commission, chief expert of national key science projects, commissioner of 第 11 页 Guangdong People’s Congress Standing Committee, and chief director of Guangdong County Economic Researching Center, vice chairman of the 11th term of Political Parties’ Congress, Independent Director of the Company. Mr. Dong Likun: Bachelor’s Degree, certified lawyer, once he was the head of International Law Division of Shanghai Social Science Institute, dean of Law School of Shenzhen University, NPC member of Shanghai, member of Guangdong political parties congress, commissioner of Shenzhen People’s Congress. At present he’s the professor of Shenzhen University Law School, senior researcher of State Council Development Institute Hong Kong and Macau Division, independent director of the Company. Mr. Yu Guo’an: doctorial degree. Once he’s the deputy professor of Northeast University, general manager of the technical center of the Company. At present he’s the chief technical officer of the Company and the convener of the Supervisory Committee. Mr. Song Wenqing: Bachelor’s degree. Currently the supervisor of the Company. Ms. Zhen Hua: Bachelor degree. She once held such positions as Director of Administration Dept. of our company. She is now assuming supervisor, Chairwoman of Trade Union, Director of HR Dept. and Director of President Office of our company. Mr. Yang Xiaozhuan: Bachelor degree; senior engineer. He once worked for Hubei Provincial machinery Industry Department and held such positions as managing director of the 2nd Machine Tool factory of Hubei, and Deputy Manager of Shenzhen Jinxin Investment Co., Ltd. Mr. Yang is now assuming Vice President of our company several other positions. Mr. Li Gang: Standing director of Shenzhen Semiconductor Lighting Industry Development Association, member of Expert Team of National 863 Program, standing director of National Semiconductor Lighting Engineering Development and Industrial Union, member of Technical Standard Workgroup of Semiconductor Lighting Technologies of China Information Industry Ministry. Currently he’s the vice president of the Company. (4) Particulars about the salaries of the current directors, supervisors and senior management (tax included) Through the approval of 2004 Shareholders’ General Meeting, the allowance for the directors and independent directors of the 4th term Board of Directors was RMB60 thousand per year, and for the supervisors of the 4th term Supervisory Committee was RMB30 thousand per year. Through the approval of the 1st meeting of the 4th term Board of Directors, the payments to senior management were formed by basic salary and floating salary based upon their performances. All of the directors, supervisors, and senior executives took remuneration from the Company, none of them took remunerations from the shareholding parties or related parties of the Company. The remunerations for the directors, supervisors and senior executives were amounted to RMB2.2786 million. (5) In the report term, Mr. Li Bangyan, the convener of the 4th term of Supervisory Committee, applied for resigning. Ms. Shao Hanqing, the independent director of the 4th term of Board, has expired for her job term and no longer assumes the position of independent director. Meanwhile, Mr. Zhou Zhigang was elected the director of the 4th term of Board, Mr. Dong Likun was elected the independent director of the 4th term of Board, Mr. Yu Guo’an was elected the convener of the 4th term of Supervisory Committee, Mr. Li Gang was engaged as the vice president of the Company. 2. Particulars about the employees There are totally 1128 employees currently in the Company, among which, 513 production employees, 102 sales employees, 127 technical employees, 42 accounting employees, 113 engineering administrative, and 231 other administrative employees, and no retired employees in the 第 12 页 Company. 825 employees are above college education, takes 73.13% of the total employees, among which, 5 are holding doctorial degree and 15 are holding master’s degree. V. Administrative Structure 1. Company Administration The Company carried out its business operation strictly following with the Company Law, Securities Law and relative regulations of China Securities Regulatory Commission and Shenzhen Stock Exchange. And the administration structure has been further improved without conflict with the laws and regulations. Particulars about the administration of the Company in the report term: 1) According to the Company Law, Securities Law, Shenzhen Stock Exchange Share Listing Rules, Enterprise Accounting System and Enterprise Accounting Standard, the Company has produced the Shareholders’ Meeting Criteria, Working Regulations of the Board of Directors, Supervisory Committee Meeting Criteria, President Work Criteria, Independent Director Working Criteria, Internal Control Criteria, Information Disclosure Criteria, Proceed Administration Regulations, Accounting Criteria, Internal Auditing Criteria, Manpower Management Regulations, Legal Affair Administration Rules, and Purchase Regulations. These have composed a mature and effective internal control system covering all aspects of the business operation including investment decision-making, related transactions, financial management, R&D management, HRM, executive management, purchase management, production and sales management and information disclosure. All of them have been implemented smoothly and there isn’t any major defect or fraudulent practices in executing of the internal control system. The internal control system was designed under principles of scientific, rational, and standardization, and with reference to the Company’s practical business operations. 2) In the report term, the Company was fully executing the circulars issued by China Securities Regulatory Commission and National Government State-owned Asset Administrative Commission, namely “Circular about capital transaction and providing of external guarantees by listed companies” [Zheng-Jian-Fa (2003)56], and “Circular about collectively resolve the problems regard capital adoption and illegal guarantees of listed companies” [Zheng-Jian-Fa (2005)37. No capital of the Company was adopted by the holding shareholder. 3) In the report term, the Company has convened and held the Shareholders’ Meetings strictly according to the regulations and ensure the shareholders are able to execute their legal rights. 4) In the report term, the Board of Directors and the Supervisory Committee have been executing their duties strictly according to the law and regulations. Convening and holding of the board meetings and the Supervisory Committee meetings were carried out with the legal procedures. Both of the Board and the Committee have been executing their duties diligently, and defending the legal interests of the Company and the whole shareholders. 5) Summary of the administrative improvement operation In the report term, according to the “Circular about the administrative improvement operation in PLCs” issued by China Securities Regulatory Commission, the Company released the “Self-inspection Report and Improving Plan of the Administrative Improvement Operation”, which was passed at the 19th meeting of the 4th term of board, on China Securities Journal, Shanghai Securities Daily, Securities Times, Hong Kong Commercial Daily, and www.cninfo.com.cn dated June 30, 2007. Relative improving operations has been conducted and open for investigation by the 第 13 页 public and Shenzhen Office of CSRC. On October 23, 2007, the Company released the “Rectification Report of the Administrative Improvement Operation”, which was adopted at the 23rd meeting of the 4th term of Board, on China Securities Journal, Shanghai Securities Daily, Securities Times, Hong Kong Commercial Daily, and www.cninfo.com.cn. The operations carried out have further improved the Company’s administrative system and provided a solid foundation for the healthy and rapid development of the Company. As scheduled by the improvement plan, the following issues are not done yet until the end of the report term. (1) The independent directors haven’t give work report to the Shareholders’ Annual Meeting 2006: They will give their report to the Shareholders’ Annual Meeting 2007; (2) The special committees in the Board were not practically working: At present the Board has setup the Development Strategy Committee and Auditing Committee, meetings have been held during the period of producing and examination of the Annual Report 2007 and meeting minutes have been produced. (3) The internal auditing system is not operated appropriately: Reports were made by the Auditing Center to the Auditing Committee along with the producing and examination process of the Annual Report 20007 and minutes have been produced. 6) In the report term, the Company hasn’t conducted any invalid practice such as providing unpublicised information to the main shareholders or substantial controllers. 2. Performance of the Independent Directors There are totally 3 independent directors of the Company, which exceeds 1/3 of the total number of directors. During the report term, the independent directors were performing their duties earnestly and independently, and exactly according with the terms of the “Article of Association”, “Rules of the Board of Directors”, and “Rules for the Independent Directors”. They issued independent opinions on significant issues of the Company, and performed consultancy functions as independent directors should have done. Independent directors’ presenting of board meetings in the report term: Name of Times of board Presented Entrusted Absented Note Independent meetings to personally proxies to Director present (times) present (times) Zheng Xueding 9 times 8 times 1 time - Asked for leave due to health problem Wen Simei 9 times 6 times 3 times - Asked for leaving due business engagement Dong Likun 8 times 8 times -- - --- The independent directors didn’t raise any demurral on the proposals adopted by the Board of Directors and Shareholders’ Meeting, not other events of the Company during the report term. 3. The Company is completely separated from the controlling shareholder in aspects of businesses, personnel, assets, organizations, and accounting. The 第 14 页 Company has its own completed businesses and capacity of independent business operation. (1) In the aspect of business: the company has its own purchasing, production, sales, and customer service system which performing independently. There is not any material related transactions occurred with the controlling shareholders. (2) In personnel: The labor management, personnel and salary management are operated independently out of the controlling shareholder. The senior managements take salaries from the Company and none of them takes senior management position in the controlling party. (3) In assets: The company owns its production, supplementary production system and accessory equipments independently, and possesses its own industrial properties, non-patent technologies, and trademark. (4) In organization: The production and business operation, executive management, and department setting are completely independent from the controlling shareholder. No situation of combined office exists. The Company adjusts its organizing structure only for its own practical requirement of development and management. (5) In accounting: The company has its own independent accounting and auditing division, established independent and completed accounting system and management rules, has its own bank account, and exercise its liability of taxation independently. 4. Assessment and motivation system of the senior management The Company adopts a salary system for senior management formed by basic salary and floating salary based upon assessment of their achievement. In accordance with “The detailed assessment rules of target management for the supervisory and service departments of year 2007” and “The detailed assessment rules for subsidiaries of year 2007”, the senior management are assessed on their capability of innovation, basic quality, performance, accomplishment of profit and account collecting goals. The results of assessment form the foundation of floating salary or penalty. 5. Establishing and improving of the internal control system 1) Internal control system review Aiming at the target on establishing of a mature administrative structure, the Company continuously performed improving works on internal controlling system. Criteria and regulations have been established regarding operation of shareholders’ meetings, Board of Directors, and Supervisory Committee, to ensure their effective execution of duties in decision-making, executive power, and supervising. Moreover, the Board has established Auditing Committee, and Strategy Committee, which operate at corresponding working criteria and support the decision-making process and 第 15 页 enhance the efficiency of Board of Directors. The internal control system has been established covering production management, financial management and information disclosure. The Company has setup the Auditing Center, which performs auditing and routine investigation on the financial practice, internal control, major projects, and personnel under the instruction of the Board of Directors. Auditing reports were issued to discover or prevent problems. 2) Key controlling operations Particulars about controlled subsidiaries: 第 16 页 Shareholding structure of the controlled subsidiaries: China Fangda Group Co., Ltd. 100% 100% 100% 100% 100% 65% 100% Ｓ Shenzhen Fangda Yide New Material ｈ Shenyang Fangda Semiconductor ｅ Jiangxi Fangda New Aluminum ｎ Shenzhen Fangda Decoration ｚ (HK) Junjia Group Co., Ltd. Fangda (Jiangxi) Co., Ltd. ｈ ｅ Engineering Co., Ltd. ｎ Industry Co., Ltd. Lighting Co., Ltd. Ｆ ａ ｎ Co., Ltd. ｇ ｄ ａ Ａ ｕ ｔ ｏ ｍ ａ ｔ ｉ ｃ Ｓ ｙ ｓ ｔ ｅ ｍ All of the controlled subsidiaries are following with the Company’s overall control and regulations. The Company conducts strict and comprehensive financial control and periodic auditing operation. Reports were issued periodically to the headquarter. Thus the Company was performing effective control over the controlled subsidiaries. There was no related transactions in the Company; all guarantees provided were to the controlled subsidiaries without to external parties. The previous financing operation happened in 1999 and the proceeds had been used up, no further financing operation was conducted. The Company insists of legal, cautious, safe, and effectiveness in major investment operations. The Articles of Association has provided clear provisions on the approving authorities of the Shareholders’ Meeting and the Board of Directors on major investment operation. Rigid investigation and decision-making procedures have been set out by the Company. In the report term, the Company invested to incorporate Shenyang Fangda Semi-conductor Lighting Co., Ltd. in Shenyang Semi-conductor Lighting Industry Garden together with Shenyang Hunnan New District State-owned Assets Operation Co. The Company invested with the 100% share equity of Shenzhen Fangda Guoke Optical-Electronic Technologies Co., Ltd. and 100% share equity of Shenzhen Woke Semiconductor Lighting Co., Ltd., which are evaluated to RMB232.1 million, to take 65% of the capital shares (in which 0.42% is hold on behalf of Li Gang). The investment was approved at the 18th, 21st meeting of the 4th term of Board and the 3rd Shareholders’ Provisional Meeting, and was announced on the official medias assigned by CSRC. 第 17 页 In the report term, according to the requirement of China Securities Regulatory Commission and the Share Listing Criteria of Shenzhen Stock Exchange, considering the information disclosing practice of the Company, we performed information disclosing timely. The truthfulness, accuracy, and completeness of the information were guaranteed, and not any false record, misleading statement or major omission occurred during the period. All of the shareholders are equally sharing all of the information provided by the Company. 3) Problems and solutions In the report term, the Company takes improving of the internal control system as a long-run operation and stressed on inspection and monitoring of the execution of the system. The Company will keep following with the regulations of CSRC and Shenzhen Stock Exchange and constantly improve the control system, to ensure strict management over finance, decision-making, and information disclosure. Internal auditing departments will be further reinforced and developed in their inspection functions. 4) Overall evaluation The current internal control system has covered comprehensively the business operation and formed a standardized management system to prevent and discover problems in the business operation, ensures healthy and normal operation. The internal control system has been well operated and complying with the requirement of CSRC. 5) Self-assessment opinion of the independent directors and Supervisory Committee (1) Opinion of the independent directors on the self-assessment report The independent directors deems: Operation of the internal control system was governed by the Company’s internal regulations. The Company has been performing strict and effective control over the subsidiaries, major investments, and information disclosure to ensure normal business operation rationally, legally and effectively. The self-assessment report has been objectively and completely reflecting the practical situation and performance of the internal control system. (2) Opinion of the Supervisory Committee on the self-assessment report The Supervisors deem: 1) The Company has established a mature internal control system in accordance with the regulations of CSRC and SSE with reference to the Company’s business practice, which ensures normal business operation and safety of the Company’s capital. 2) The Company has established complete organization structures, complete and effective personnel in internal auditing department, which ensured the execution and monitoring of important operations of the internal control system. The self-assessment report has been objectively and completely reflecting the practical situation and performance of the internal control system. 第 18 页 VI. Particulars about the Shareholders’ Meeting The Company held 4 shareholders’ meetings in the report term. The followings are the details: (I) Shareholders’ Annual Meeting 2006 The Company announced the convening of the Shareholders’ General Meeting 2006 and the agendas on March 20, 2007 issues of Securities Times, China Securities Daily, Shanghai Securities Times and Hong Kong Commercial Daily. The meeting was held in the multi-function hall at the 1st floor of Fangda Building on April 9, 2007. 9 shareholders (attorneys) attended the meeting, representing 129,200,969 shares, account for 36.63% of the total share capital. The meeting was regarded as complying with the Caompany Law and Articles of Association of the Company. The resolutions were passed as the followings: 1. The Board of Directors’ Work Report 2006 2. The Supervisory Committee’s Work Report 2006 3. The Financial Settlement Report 2006 4. The proposal of profit distribution and capitalizing of common reserves for year 2006 5. Proposal on remedy the losses by surplus common reserves 6. The Annual Report 2006 and the summary. 7. Proposal on engaging of public accountants for year 2007 8. The draft amendment of the Articles of Association 9. Proposal on providing guarantees to the fully held subsidiaries of the Company 10. Proposal on adding of a director and replacing of an independent director 11. Proposal on replacing of a supervisor The above resolutions were released on April 10, 2007 by Securities Times, China Securities Journal, Shanghai Securities Daily, and Hong Kong Commercial Daily. (II) Shareholders’ Special Meeting 1. The 1st Shareholders’ Special Meeting 2007 The Company announced the convening of the 1st Shareholders’ Special Meeting 2007 and the agendas on December 23, 2006 issues of Securities Times, China Securities Daily, Shanghai Securities Times and Hong Kong Commercial Daily. The meeting was held in the multi-function hall at the 1st floor of Fangda Building on January 8, 2007. 8 shareholders (attorneys) attended the meeting, representing 129,185,169 shares, account for 36.63% of the total share capital. The meeting was regarded as complying with the Company Law and Articles of Association of the Company. The resolutions were passed as the followings: 第 19 页 1. Proposal on replacing the CPA for A-shares of the Company for year 2006. 2. Proposal on replacing the CPA for B-shares of the Company for year 2006. The above resolutions were released on January 9, 2007 by Securities Times, China Securities Journal, Shanghai Securities Daily, and Hong Kong Commercial Daily 2. The 2nd Shareholders’ Special Meeting 2007 The Company announced the convening of the 2nd Shareholders’ Special Meeting 2007 and the agendas on July 21, 2007 issues of Securities Times, China Securities Daily, Shanghai Securities Times and Hong Kong Commercial Daily. The meeting was held in the multi-function hall at the 1st floor of Fangda Building on August 6, 2007. 4 shareholders (attorneys) attended the meeting, representing 105,775,997 shares, account for 27.26% of the total share capital. The meeting was regarded as complying with the Company Law and Articles of Association of the Company. The resolutions were passed as the followings: 1. The proposal about providing guarantees for the application of comprehensive bank credit by the Company and fully-owned subsidiaries; 2. The proposal of enlarging the business scope of the Company. 3. The proposal of revising the Articles of Association of the Company. The above resolutions were released on August 7, 2007 by Securities Times, China Securities Journal, Shanghai Securities Daily, and Hong Kong Commercial Daily 3. The 3rd Shareholders’ Special Meeting 2007 The Company announced the convening of the 3rd Shareholders’ Special Meeting 2007 and the agendas on September 6, 2007 issues of Securities Times, China Securities Daily, Shanghai Securities Times and Hong Kong Commercial Daily. The meeting was held in the multi-function hall at the 1st floor of Fangda Building on September 21, 2007. 6 shareholders (attorneys) attended the meeting, representing 106,556,414 shares, account for 27.46% of the total share capital. The meeting was regarded as complying with the Company Law and Articles of Association of the Company. The resolutions passed was the investment in the semiconductor lighting joint venture in Shenyang: The above resolutions were released on September 22, 2007 by Securities Times, China Securities Journal, Shanghai Securities Daily, and Hong Kong Commercial Daily 第 20 页 VII. Report of the Board of Directors 1. Review of operation during the report period. (1) Operation summary In 2007, the civil economy kept running in high speed, and the price index kept increasing, the macroscopical economic adjustment continuously enhanced, the Back of China increased prime rate, the cost of material, human resource and raising capital continuously increased, the operation environment for enterprise has gotten tougher, operation cost increased and the competition has been more tougher. During the period, the Company overcame lots of difficulties to achieve the assigned operation target. The Company had a year income of RMB858,988,300 which increased 97.10% compared to that last year, and operation income of RMB640,246,900, net profit of RMB24,386,000 which increased 205.33% compared to that last year, and operation cash flow of RMB81.895,400.Till the end of the report period, the Company had a order stock of RMB547,810,000, which will support the operation in 2008 well. (2) Main business and operation The Company engages in design, development, manufacturing, installation, sale, after sale service of new type construction material, composite material, metal products, metal structure, environment protecting equipment and devices, security devices, metallurgy equipment, integrative optical mechanical products, macromolecule material and products, precision chemistry products, mechanism, optical-electricity material and devices, electronic display devices, vision and hearing devices, transportation utilities, subway shielded door, heating plumb products, water distribution devices, centralized air conditioner and peripheries, semiconductor material and components, IC, light source devices, sun energy product. And logistics, car park etc. 1) The new type construction material industry orbited in continuous development During the period, the market exploiting of new type construction industry was good. Basing on the construction technology advantages of energy saving and environment protecting, The Company emphasized on the purchase order of curtain wall construction, signed the curtain wall construction contracts with Mongolia Ulan Bator Development Building, Nanjing Hongqiao New City Plaza, Xi’an Europe-Asia Economic Forum Building, 2008 Beijing Olympic Bicycle Building--Laoshan Bicycle Gym, Shenyang Hilton restaurant, Xiamen Haifu Center, Xiamen Strait Communication and International Meeting Center, Hanzhou Jindu City Xinyu Center and other major projects. And signed the aluminum board supplying contracts with Guanzhou Agriculture Bank Building, Shenzhen Fulong Tunnel, Hubei Tumour Hospital, Fujian Longyan Tobacco Building. Thereinto, the Hanzhou Jundu City Xinyu Project was the super scale high technology energy-saving construction contract price amounts to RMB163,700,000.During the period, the international market exploration achieved great progress, signed the 0.1 trillion Macao dollars (about RMB0.65 trillion) aboard sale agreement of curtain wall products, and signed the curtain wall construction contract with the Macao Science Building. In 2007, the Company signed new type construction material contract orders of RMB735,730,000 with sale income of RMB525,538,900.During the period, basing on the manufacturing capacity advantage of Nanchang manufacturing base, the Company achieved highest sale volume and sale income in the history on aluminum board. During the report, the exclusively-invested subsidiary corporation of Shenzhen Fangda Construction Decoration Co.,Ltd was honored as “Shenzhen High-tech Enterprise”; as “2006 China Curtain wall Industry Top 50” by the China Construction Decoration Industry Association; as “China Construction Technology Self-innovation Enterprise” by the China Construction Department.; the constructed Chongqing Times Plaza curtain wall project was honor as the “Luban Prize” by the China 第 21 页 Construction Department; the constructed Qinghua University Art College Teaching Building was honored silver medal to be as the national excellent project in 2007; the China Life Insurance Plaza curtain wall decoration project was honored the Purple Gold Cup prize to be as the excellent Jiansu construction decoration project. Facing the tough competition, the Company’s new type construction material industry has shown advantages on human resource, administration, technology, brand, manufacturing capacity by couples of years’ efforts. The brand of Fangda has continuously being increased force on effect and competition. 2) The orbited shielded door products with self IP rights achieved major success In 2007 the orbited shielded door products achieved major success in the aspects of technology research and market exploration. During the report period, the orbited shielded door products with self IP rights gained the bid of general contract of Shenzhen subway first rail continuous construction project screen door (PSD) and gained the bids of east part of the Shenyang subway first rail extension project and the project of Shenzhen subway second rail project. During the period, the demo version of orbited shielded door products with self IP rights smoothly passed the evaluation of 1 million non-error test by corresponding organization, and passed the professional evaluation by the national Construction Department technology group and the National Development Reform Commission, and honored the prize of “introduction, digestion, absorb, innovation” in the Shenzhen technology innovation prize evaluation in 2006. The Company’s self-developed orbited shielded door products has matured and successfully promoted on the market, it entirely fulfilled requirements of the nation system of orbited shielded door for transportation, which finished the long term foreign monopolization in China of the core technology of the orbited shielded door. The transportation orbited shielded door products with self IP rights is very useful to sharply decrease cost and improve market competitive force and occupying rate, and it has very important sense to the development of the Company’s transportation orbited shielded door industry. Now the Company’s subway screen door has more than 100 national patents and software author right, and has broadly used in the subway system of Hongkong , Guangzhou, Shanghai, Tianjin, Beijing, Shenzhen, Shenyang and other big cities in China, the market occupation rate is number one and keeps the comprehensive leader position on human resource, technology, brand, market in the industry of subway shielded door. 3) Semi-conductor lighting industry was facing new developing opportunities. During the period, to further expand scale and improve the competitive force, the Company invested RMB 0.357 billion jointly with Shenyang Hunnan New District National Asset Operation company to establish Shenyang Fangda Semi-conductor Lighting Co.,Ltd, which has important strategic sense to power and expand the Company’s semi-conductor lighting industry. After many years’ technology accumulation and development in the semi-conductor industry, the Company has occupied the leader position in the Chinese semi-conductor industry, has achieved series of major technology breakthrough and self-owned intelligence property rights, which has formed a compete industry chain of from semi-conductor lighting extension chip, chip, to the development, design, manufacturing, installation of semiconductor lighting products and application projects, which been consummated during the business operation procedure. 4) Energy saving and environment protecting products have good developing trends, technology innovation continuously improved deeply. Along with the complete deployment of the “11th five years” plan, the government has deployed energy saving as the national policy, the energy saving and waster reducing is a important policy in the economic development and is the necessary choice and road in establishing resource saving and environment friendly society and in improving economic structure adjustment, in changing the way of promoting economy. The best reducing waste measure is energy saving which promote it from the source. Under the trend of government developing recycling economy and enhancing the energy saving and waste reducing, the manufacturers of the energy saving and reducing waste devices are 第 22 页 facing the historical developing opportunity, the energy saving and reducing waste industry will be a new born important force in the future economic development in the society, this industry has large developing potentials. The Company’s semiconductor lighting products, subway screen door products, Solar photovoltaic curtain wall are all high efficient, energy saving, waste reducing products and have comprehensive advantages of own intelligence property rights, technology and performance advance, brand, market and others, which in accordance with the national industry developing direction and get broad application, these products have large developing potentials, which well support sharing achievements of national developing recycling economy. During the report period, the Company was honored as “The Top Ten Developing Recycling Economy Enterprise (the 1st time)” “Basing on Technology, Sourcing on Innovation” is the Company’s operation policy. In many years, the Company highly emphasize on technology innovation and intelligence property right, persist in own innovation, the force of self-innovation increases continuously, the comprehensive innovation force has been the leader position among the congeneric companies. During the period, the Company’s exclusively-invested subsidiary the Shenzhen Fangda Decoration Project Co.,Ltd was honored the “China Constructing technology self-innovation preponderant enterprise” and “Shenzhen high-tech enterprise” by the Construction Department. The Shenzhen New World Business Center curtain wall project constructed by the Company was listed in the Shenzhen city energy saving rate-compensation projects and gotten the government’s energy saving and rate compensation for be in accordance with the national industrial policies and having the wonderful performance of high efficiency and energy saving. During the period, the Company won the bid of implementing the major project of semiconductor lighting in the “11th five years” 863 plan, which named “high efficiency and high power GAN LED chip and white semiconductor lighting technology”; the Company’s successfully researched Inverse Installation Soldered LED chip—“Tiger” high power semiconductor lighting LED chip was listed as the 2006 National Important Product and as the 2006 Guangdong Province Important New Product; the national industrial subway shielded door standard of “orbited shielded door standard” which solely compiled by the Company was published out and deployed from Mar 1 2007 by the Construction Department; the orbited shielded door products which the Company own the IP were honored the Shenzhen 2006 technology innovation prize of “introducing, digestion, re-innovation”; the Company also set up five “china enterprise records”, and set up record amounting up to 25.During the report period, the Company applied national patents of 104 Pcs, which comprised of 36 invention patents. Till the end of the report period, the Company had 448 national authorized patents, comprising of 19 invention patents, the contents included new type construction material, subway screen door, semiconductor lighting and etc. During the period, besides the responsibility of national, province, city technology projects, the Company also implemented nine new product research projects and four technology innovation projects. During the report period, the Company was referred as the Shenzhen city IP advantageous enterprise, the first batch of Shenzhen city main private company, 2006 Shenzhen city top one hundred. The Company’s main business income and net profit mainly came from new type construction material industry, the products which occupied 10% of the main business operation income or net profit: curtain wall, composite aluminum board and one-layer formed aluminum board, aluminum material, subway screen door, the main business and structure, main business profitable force has changed a lot compared to the last period for the sharply decreasing sale income of the subway screen door product, and the main business income, main business profit is described as below according to industry, product, area separately. UNIT: RMB0’000 Distribution on industries Change of Change of cost Change of operation Operation Operation On industry or product Turnover income over last over last year profit ratio over last cost profit ratio year % % year % Sales of products 19,985.51 16,768.90 16.09% -9.13% -14.53% 5.30% Construction and 40,481.23 35,382.20 12.60% -10.33% -10.40% 0.07% installations Sub-total 60,466.75 52,151.10 13.75% -9.93% -11.77% 1.79% Distribution on products Outer-wall products 34,910.52 30,609.95 12.32% 18.88% 14.44% 3.40% Complex aluminum 12,658.44 10,215.63 19.30% 6.40% -2.19% 7.09% boards and single 第 23 页 profiled plates Preshaped aluminum 4,502.34 4,355.58 3.26% -42.11% -40.63% -2.41% material and others Screen door of metro 5,570.72 4,772.25 14.33% -64.69% -62.54% -4.92% station 第 24 页 Regions Turnover Change of income over last year % North 8,524.38 -30.15% South-west 4,168.03 578.69% East 13,668.72 17.67% North-east 1,472.11 26.05% Central 2,849.42 -52.17% North-west 3,846.43 37.38% South 19,664.32 -31.02% Export 6,273.35 46.97% Total 60,466.75 -9.93% The Company’s total purchasing from the top five suppliers was RMB76,730,000 which occupied 17% of the year total purchasing amount, and the total sale to the top five customers was RMB172,255,000 which occupied 26.9% of the year total sale income amount (3) Assets Composition Till the end of the period, the Company’s total asset was RMB1,316,900,000 which comprised of account receivable of RMB276,750,000 which occupied 21.02% of the total asset, and stock of RMB95,710,000 which occupied 7.27% of the total asset, and investing property of RMB265,460,000 which occupied 20.16% of the total asset, and long-term stock equity investment of RMB4,500,000 which occupied 0.34% of the total asset, and fixed asset of RMB290,880,000 which occupied 22.09% of the total asset, and projects on constructing of RMB560,000 which occupied 0.04% of the total asset, and short-term loan of RMB165,000,000 which occupied 12.53% of the total asset, and long-term loan of RMB198,000,000 which occupied 15.04% of the total asset During the period, the Company using fair value calculation model on the investing property, the fair value calculation model was evaluated by the Shenzhen Guozheng Property Evaluation Co.,Ltd using the method of market comparison, During the period, the sale expense, management expense, finance expense, income tax and other finance data had no major change comparing with those of the last year. (4) Cash flow composition During the period, the Company’s net cash flow comes from operation was RMB81,895,400, and net cash flow comes from investing was RMB-20,596,100, and net cash flow comes from raising capital was RMB-10,595,200 which increased 24.58% compared to last year which mainly come from the cash input and bank loan increasing because of building up joint stock company in Shenyang city. During the period, the Company enhanced the customer credit management, and improved push force on account receivable, the year end account receivable decreased about RMB60,000,000 comparing with the year’s beginning, which caused the cash flow high than the net profit. (5) Operation and achievements of main subsidiary, joint stock companies. As of December 31st 2007, the Company was possessing 6 fully owned subsidiaries, they are: Shenzhen Fangda Decoration Engineering Co., Ltd., Jiangxi Fangda New-type Aluminum Co., Ltd., Shenzhen Fangda Yide New Material Co., Ltd., Hong Kong Junjia Group Co., Ltd., Shenzhen Fangda Automatic System Co., Ltd. and Fangda New Materials (Jiangxi) Co., Ltd. One holding subsidiary is Shenzhen Fangda Semiconductor Lighting Co., Ltd. Shenzhen Fangda Decoration Engineering Co., Ltd is the largest manufacturer of glass outer wall in the country at present. They are mainly involved in designing, production, installation of glass outer wall, doors, windows, interior and exterior decoration and furniture. Jiangxi Fangda New-type Aluminum Materials Co., Ltd is mainly involved in developing, production and trading of various pre-shaped aluminum materials. 第 25 页 Shenzhen Fangda Automatic System Co., Ltd. is mainly involved in developing, production, and installation of metro screen door system Fangda New Material (Jiangxi) Co., Ltd. and Shenzhen Fangda Yide New Material Co., Ltd. are involved in production and trading of single layer aluminum plates and complex aluminum plates. Shenzhen Fangda Semiconductor Lighting Co., Ltd is involved in developing, manufacturing and sale of GAN chips and corresponding middle-river and downriver products. (6) Special-aimed entity under controlled The Company had no special-aimed entity under controlled. 2. Future Development Prospect In 2008, the national economy increasing will keep on going in high speed, the market requirement will keep on going quickly, but the price increasing trend will still be going on and the national macroscopical adjustment will be enhanced, the contracted currency policy will continue. Simultaneously, the government deeply realized the importance of energy saving and waste reducing and referred the implementation of energy saving and waste reducing as the important standard on evaluating the government’s developing economy, and as the implementation of the scientific development. Now, more relevant polices, measures are or were setting up and deployed, the all level governments are promoting the energy saving and waste reducing highly ever than never happened. Under these circumstances, the Company will deeply exploit the market of curtain wall, semiconductor lighting, subway screen door which have own IP rights to devote to the national recycling economy and to promote energy saving and waste reducing. The products of solar curtain wall, super low energy consumption curtain wall system, color semiconductor lighting curtain wall, nanometer ALCF board and other energy saving and waste reducing products is broadly used in important model construction projects in many countries, the Company has obvious advantages in the high-end energy saving construction material field, the many project constructed were horned series of national and provincial prizes such as “Zhantianyou Construction Prize” and “Luban Prize”. Invited by the relative nation department, the Company attended the compilation of some standards such as the national first construction energy saving standard. Along with the national energy saving and environment protecting polices’ deep implementation, the market of the Company’s l energy saving and environment protecting products was inspired. In 2008, by consummating regulations especially the inspiring regulation, the Company will continuously keep the advantages on the aspects of technology, brand, manufacturing capacity to further enhance the new product research, and will emphasize on high grade major orders to positively exploit international market especially the international market of high end products to consummate the market structure, and the Company will continue to implement the current orders and control the cost especially the cost of the aluminum, steel, glass material by deploying more measures to support a large and wonderful progress in the new material industry. The Company won the bid of Shenzhen Subway 1st rail continuing construction screen door system, and the market had undergoing a major breakthrough for the transportation orbited shied door products which have own IP right, the national first transportation orbited screen door standard compiled mainly by the Company was published out, the Company had gained advance opportunities in the market of the transportation orbited screen door products. Along with quick increasing economy, the cities like Beijing Shanghai Shenzhen Guangzhou Nanjing Shenyang Wuhan Hangzhou Chengdou are promoting the subway construction, the civil subway screen door market has come into the high increasing term. In 2008, the Company will tightly hold the excellent developing opportunity of subway shied door, and continuously consummate the research of subway screen door products to upgrade the products to keep the competitive force of the Company’s products. Simultaneously, utilizing the comprehensive leading advantages and powerful effects in the industry, the Company will deeply exploit market to further promote the market of self-owned products to consolidate the market share in the industry and share the achievements accompanied with the national high increasing subway screen door industry. 第 26 页 The government put more emphasis on energy saving and water reducing, the semiconductor lighting industry is one with the highest potentials, the policies for promoting the semiconductor lighting industry were or are setting up. After many years’ technology accumulation and development in the semi-conductor industry, the Company has occupied the leader position in the Chinese semi-conductor industry, has achieved series of major technology breakthrough and self-owned intelligence property rights, which has formed a compete industry chain of from semi-conductor lighting extension chip, chip, to the development, design, manufacturing, installation of semiconductor lighting products and application projects. In 2007, to further expand scale and enhance competitive power, the Company invested and set up the Shenyang Fangda Semiconductor lighting Co.,Ltd. In 2008, the Company will enhance the planning and construction of the Shenyang Fangda Semiconductor lighting Co.,Ltd to fasten the beginning manufacturing and to fasted the Company entering into new fast lane of developing to entirely share the achievements of the national developing recycling economy. Demand on fund and operation plan In aspect of financing, the Company will better operate the current capital and obtain capital to satisfy the need of operation. To obtain the operations target in 2008, the company and subsidiary companies are estimated to need RMB 500 million in total in 2008, in which include keeping current loan of RMB400 million from the bank and RMB100 million of own capital arrangement. 3. Investment in the report term (1) Application of the raised capital The Company raised no funds through public offering in the report term. The fund raised previously has been utilized completely in year 2000. (2) Application of capital from other sources On Sep 21 2007, the Company signed contract with the Shenyang Hunnan New District National Asset Operation Co.,Ltd to jointly invest on setting up the Shenyang Fangda Semiconductor Lighting Co.,Ltd (referred as the jointly-invested company), the total invest of the jointly-invested company was RMB357,100,000 and registered capital of RMB 200,000,000.The Company invested value of RMB232,100,000 of equity of the exclusively-invested subsidiary corporations of Shenzhen Fangda Guoke Opti-electric Technology Co.,Ltd and Shenzhen Woke Semiconductor Lighting Co.,Ltd, which occupied 65% of the total investment (including 0.42% shares held for Ligang by the Company), and the investment was invested totally in one time, the Shenyang Hunnan New District National Asset Operation Co.,Ltd invested cash of RMB100 million and 127 unit acres land lot of Shenyang city Hunnan New District(referred as RMB25 millions), which occupied 35% of the total investment. Till now, the jointly-invested company has finished the commerce and industry registration, and are constructing. 4. Correction of errors caused by accounting policy, accounting estimation and of main previous errors. During the period, the Company had no Correction of errors caused by accounting policy, accounting estimation and of main previous errors. 第 27 页 5. Effect on profit from changes of fair value calculation tools and of fair value of investing properties. During the period, the change of fair value from the Company’s investing property was RMB42,430,000, the invested properties was mainly business building and factory building in Shenzhen city, the current prices are far more lower than the residence building and other business construction. Although the Shenzhen residence price has been decreased a little in 2008, the rental price is still keep the increasing trend and the supply is far more less the requirement, so these properties have long-term and stable rental income. With the increasing economy, we think these properties have future value increasing space. 6. Tianjian Huazheng Zhongzhou CPA (Beijing) issued standard auditing report without qualified opinion for the financial report of 2006. 7. Routine works of the Board (1) Board meetings and decisions 1) The 15th meeting of the 4th term of Board of Directors was held in the morning of Mar 18 2007 in the meeting room on the 5th floor of Fangda Technology Building. The decisions were published by Mar 20 2007 issues of Securities Times, China Securities Journal, Shanghai Securities Daily and Hong Kong Commercial Daily. 2) The 16th meeting of the 4th term of Board of Directors was held in the afternoon of Apr 19 2007 in the meeting room on the 5th floor of Fangda Technology Building. The meeting evaluated and passed the first quarter finance report. 3) The 17th meeting of the 4th term of Board of Directors was held in the morning of May 17 2007 in the meeting room on the 5th floor of Fangda Technology Building. The decisions were published by May 19 2007 issues of Securities Times, China Securities Journal, Shanghai Securities Daily and Hong Kong Commercial Daily. 4) The 18th meeting of the 4th term of Board of Directors was held in the afternoon of June 3 2007 in the meeting room on the 5th floor of Fangda Technology Building. The decisions were published by June 15 2007 issues of Securities Times, China Securities Journal, Shanghai Securities Daily and Hong Kong Commercial Daily. 5) The 19th meeting of the 4th term of Board of Directors was held in the morning of June 26 2007 by tele-communication. The decisions were published by June 30 2007 issues of Securities Times, China Securities Journal, Shanghai Securities Daily and Hong Kong Commercial Daily. 6) The 20th meeting of the 4th term of Board of Directors was held in the afternoon of July 19 2007 in the meeting room on the 5th floor of Fangda Technology Building. The decisions were published by July 21 2007 issues of Securities Times, China Securities Journal, Shanghai Securities Daily and Hong Kong Commercial Daily. 7) The 21st meeting of the 4th term of Board of Directors was held in the afternoon of Sep 5 2007 in the meeting room on the 5th floor of Fangda Technology Building. The decisions were published by Sep 6 2007 issues of Securities Times, China Securities Journal, Shanghai Securities Daily and Hong Kong Commercial Daily. 8) The 22nd meeting of the 4th term of Board of Directors was held in the afternoon of Oct 17 2007 in the meeting room on the 5th floor of Fangda Technology Building. The meeting evaluated and passed the 3rd quarter finance report. 第 28 页 9) The 23rd meeting of the 4th term of Board of Directors was held in the morning of Oct 19 2007 by tele-communication. The decisions were published by Oct 23 2007 issues of Securities Times, China Securities Journal, Shanghai Securities Daily and Hong Kong Commercial Daily. (2) Executing of the resolutions of Shareholders’ General Meeting by the Board of Directors As authorized by the Shareholders’ General Meeting, the following jobs have been done: 1) Change of engagement of the auditing public certificated accountant company the year 2006. 2) Signed applying credit amount and guarantee contract with bank. 3) Implemented public fund reserve Turning to increase subscribed capital 4) Signed the contract to jointly invest Shenyang semiconductor lighting company. 5) Changed the commerce and industry registration. (3) Summary of the function of the Audit Committee of the Board of Directors. The Audit Committee of the Board of Directors supervise and check the Company routine audit, evaluate the inner-control system and implementation and understand the company’s finance state and operation. After the Company settled the release time of the finance report, The Audit Committee gave out two official letters to negotiate with the public certificated accountant company to arrange the annual finance report works and time to ensure finishing in time, read and evaluated the Company compiled finance report before the public certificated accountants entering, and formed official written opinions by analyzing the operation inside the finance report. After the public certificated accountants entering, the Audit Committee continuously enhanced the communication with the audit accountants and wrote letter to supervise the time arrangement again. After the public certificated accountants giving out the first audit opinions, the Audit Committee read and evaluated the finance report again, and basically agree with the public certificated accountants giving out audit report, and formed written opinions about the required detail described questions. After the public certificated accountants giving out the last audit opinions, the Audit Committee submitted opinions on finance report and summary report of the public certificated accountants company working in the finance report to the Board of Directors, and the Audit Committee evaluated and passed the 2007 finance report and they think the engaged Tianjian Huazheng Zhongzhou CPA (Beijing) successfully finished the relative works entrusted by the Company in the audit service, and finished the finance report audit work in 2007 under relevant regulations. The Audit Committee’s opinion on engaging 2008 audit organization is as following: the Audit Committee will select and decide 2008 finance report audit organization and report to the Board of Directors and the General Shareholder’s Meeting for evaluation based on the principal of promoting the Company’s scientific and regulated operation. (4) Summary of the function of the Stratagem Committee of the Board of Directors. The Stratagem Committee of the Board of Directors analyzed and gave out opinions on 2007 operation target and operation plan, and supervised and checked the operation affairs, and they think the Company basically achieved the 2007 operation target and basically supported the future development. The Stratagem Committee agreed to the 2008 operation plan and target proposed by the management which assure the Company’s continuous development. (5) There is no remuneration committee under the Board of Directors. 第 29 页 8. Dividend distribution plan or capitalizing of common reserves The consolidated and audited net profit of year 2007 was RMB24,386,023.62, the net profit of the parent company was RMB30,081,775.80. No profit distribution will be implemented for year 2007. Net profit at the end of year was relatively small, thus will be retained for future expanding in 2008 The Company plans to capitalize the capital common reserves to the whole shareholders. As of December 31st 2007, the balance of capital reserves was audited to RMB70,956,956.18. While RM38,798,760 will be capitalized to capital shares. On the base of total capital shares amounted 387,987,600, one new share will be added upon each 10 shares. Namely 1 new shares to each 10 A-shares, totally 19,770,089 are about to be added; and 1 new shares to each 10 B-shares, totally 19,028,671 are about to be added. The capital shares of the Company will become 426,786,360 after the capitalization. 9. The Company hasn’t changed the official information disclosure presses and the website in the report term. 第 30 页 VIII. Report of the Supervisory Committee 1. Meetings held in the report term, and the resolutions (1) The 9th meeting of the 4th term of Supervisory Committee was held in the morning of March 18, 2007 in the meeting room on the 5th floor of Fangda Technologies Building. The resolutions were published by March 20, 2007 issues of Securities Times, China Securities Daily, Shanghai Securities Daily and Hong Kong Commercial Daily. (2) The 10th meeting of the 4th term of Supervisory Committee was held in the morning of April 9, 2007 in the meeting room on the 5th floor of Fangda Technologies Building. The resolutions were published by April 10, 2007 issues of Securities Times, China Securities Daily, Shanghai Securities Daily and Hong Kong Commercial Daily. (3) The 11th meeting of the 4th term of Supervisory Committee was held in the afternoon of April 19, 2007 in the meeting room on the 5th floor of Fanda Technologies Building. The 1st Quarterly Report was examined and passed at the meeting. (4) The 12th meeting of the 4th term of Supervisory Committee was held in the afternoon of July 19th 2007 in the meeting room on the 5th floor of Fanda Technologies Building. The Interim Report 2007 and the summary were examined and passed at the meeting. (5) The 13th meeting of the 4th Supervisory Committee was held in the afternoon of October 17th 2006 in the meeting room at the 5th floor of Fangda Technologies Building. The 3rd Quarterly Report 2007 was examined on the meeting. 2. The Supervisory Committee issues the independent opinion on the following issues: (1) The Company has already established a mature internal control system and has been inproving it constantly. The procedure of decision-making was in conformity with Company Law and Articles of Association of the Company. The directors and senior executives had no actions of breaking national laws and regulations and Articles of Association or damaging the interest of the Company when they performed their duties. (2) Ascenda Certified Public Accountants issued standard auditing report without qualified opinion for the financial report of 2007. The financial report is frankly reflecting the financial situation and business performance of the Company. (3) The Company actually raised RMB112.8784 million in the share allotting in 1999. The entire fund raised has been put into investment as set out by the Share Placing Prospectus. (4) Asset purchasing or selling were on rational prices, and no under table transactions were conducted. No operation was done harming the shareholders’ interests or cause losses of the Company’s capital. (5) No trade with related parties occurred in the report term, thus no impairment on the Company’s interest. 第 31 页 IX. Significant Events 1. Material lawsuits and arbitration events in the report term (1) On January 13, 2002, Shenzhen Fangda Decoration Engineering Co., Ltd. (Fangda Decoration) appealed to Dalian Arbitration Committee against Dalian Hongjin World Trade Center for the outstanding payment of RMB22,112,004.30 and interests. As of December 31, 2007, this case is still in arbitration process. (2) On February 29, 2004, Fangda Decoration appealed to Beijing No.2 Middle Court against Beijing Jiaxuan Real-estate Development Co., Ltd. for the outstanding debt of RMB14,979,345.88 and interests. As of December 31, 2007, this case is still in hearing process. (3) On April 30, 2007, Fangda Decoration appealed to Heilongjiang Ha’erbin Middle Court against Heilongjiang Beiya Real-estate Development Co., Ltd. For the outstanding debt of RMB10,954,157.88 and interests. As of December 31, 2007, this case is still in hearing process. 2. No bankruptcy or restructuring issue happened in the report term 3. Holding of other PLCs’ equities and trading of other PLCs’ shares (1) Holding of other PLCs’ equities and participating in commercial banks, securities dealers, insurance companies, trust companies, and future. In RMB Gain/loss Change of Book value at Source Stock Initial Share of the owners’ Accounting Stock ID the end of of Code investment portion report equity in the subject term shares term report term Disposable Debt Xugong 000425 9,520,388.31 0.36% 33,758,256.25 0.00 19,871,499.71 financial paid in Tech asset kind Disposable Debt Sihuan 000518 6,270,000.00 0.70% 47,920,564.80 0.00 33,552,112.86 financial paid in Biology asset kind Long-term S*ST Debt share 600800 Magnetic 4,850,000.00 0.18% 1,500,000.00 0.00 0.00 paid in equity Card kind investment Total --- 20,640,388.31 --- 83,178,821.05 0.00 53,423,612.57 --- --- 第 32 页 (2) Trading of other PLCs’ shares In RMB Amount of shares at Trading amount in the Amount at the Investment Name of shares Capital used beginning of term report term end of term income gained Yuyin Holdings 0 2,000 0 27,580 0.00 China Petrol 0 40,000 0 668,000 0.00 Yunhai Metal 0 1,500 0 16,185 0.00 Quanjude 0 1,500 0 17,085 0.00 Guangbai 0 1,000 0 11,680 0.00 China Railway 0 42,000 0 201,600 0.00 Construction Chengfei 0 1,500 0 14,850 0.00 Jicheng Purchased Wuhan Fangu 0 500 0 10,550 0.00 China Marine 0 28,000 0 185,360 0.00 Container Hailong 0 500 0 5,245 0.00 Software Dongjing 0 500 0 4,400 0.00 Electronics China Pacific 0 11,000 0 330,000 0.00 Insurance Yuyin Holdings 0 2,000 0 0 93,932.00 China Petrol 0 40,000 0 0 1,268,184.00 Yunhai Metal 0 1,500 0 0 18,177.00 Quanjude 0 1,500 0 0 44,170.00 Guangbai 0 1,000 0 0 27,681.92 China Railway 0 42,000 0 0 116,281.20 Construction Chengfei 0 1,500 0 0 13,984.20 Jicheng Selling Wuhan Fangu 0 500 0 0 12,109.00 China Marine 0 28,000 0 0 113,850.24 Container Hailong 0 500 0 0 11,189.00 Software Dongjing 0 500 0 0 7,113.76 Electronics China Pacific 0 11,000 0 0 206,833.00 Insurance 4. Asset acquiring or selling nor takeover or merger events. (1) In the report term, the Company conducted neither asset acquiring or selling nor takeover or merger events (2) Selling of assets in the report term On March 20th 2007, the Company sold the 100% share equities of Fangda (US) Company to natural person Zhang Jian at price of USD5,003,000, which influenced the net gain/loss by RMB-860.7 thousand. However it made no major influence on the consistency of the Company’s business or stability of the executive team. On April 30 2007, the 100% share equities of Shenzhen Fangda Special Structure Co., Ltd. hold by the Company and its subsidiaries to natural person Zhang Hanjin, and Rao Libing at price of RMB5 million, which influenced the net gain/loss by RMB1.5824 million. It made no major influence on the consistency of the Company’s business or stability of the executive team. 第 33 页 5. No share option incentive program was implemented in the report term 6. No material related transactions happened in the report term 7. Material contracts and guarantees (1) The Company has never been involved in such events as keeping as custodian, contracted or leased any other company’s assets and vice versa in the report period or extended from the previous years. (2) The Company conducted no illegal guarantee issues other than providing guarantee to the fully owned and controlled subsidiaries. The details are as the followings: In RMB0’000 External Guarantee (Exclude controlled subsidiaries) Guarantee provided to Date when occured Amount Type of Term Completed Related guaranteed guarantee or not guarantee Total occurred in the report term 0 Total of balance of guarantee at the end of report term 0 Guarantee provided to controlled subsidiaries Total of guarantee provide to controlled subsidiaries in the report 23192.22 term Total of balance of guarantee provide to controlled subsidiaries in 15437.22 the report term Total of guarantee (including provided to controlled subsidiaries) Total of guarantees 15437.22 Proportion of the total guarantee in the net asset of the Company 26.53% Including: Guarantee provided to shareholders, substantial controller and 0 their related parties Amount of guarantee provided to objects with over 70% of liability / 0 asset ratio, directly or indirectly Part of total guarantee exceeded 50% of the net asset 0 Total of the above 3 items 0 (3) In the report term, the Company neither entrusted nor entrusted by others to manage cash assets or loans. (4) Other material contracts: 1) Xiamen Channel Intercommunication Center International Conference Center glass curtain wall project was contracted for RMB97,785,200. It was started in November 2007 and expected to be completed in July 2008. 2) Hangzhou City Xinyu Building No. 2, 3, 5, 6 energy saving glass curtain wall project was obtained at the end of December 2007 with contract value of RMB163.70 million. It is expected to be started in early May 2008 and planned to be completed in July 2008. 3) Shenzhen Metro Line No.1 expanding project PSD system overall contracting has adopted the door machine and controlling unit developed by the Company itself. The sample machine has passed the “1 million times test”. The total contract value will be RMB79.8586 million. The project is now 第 34 页 proceeding in schedule. It is planned to be completed in December 2009. Shenzhen Metro Line No.2 screen door system comprehensive contract has through the designing and communication process and the contract value is RMB169.256 million. At present the project is in sample machine installation stage. The project is expected to be finished in 2010. 4) Production of the first lot of contracts of the glass curtain products with Australia Dollar 100 million of value has started in August 2007. The first batch of materials will be exported in October. Up to present, supplying for two projects has been accomplished. And the contract is still in process. 8. Fulfilling of commitments made regarding share equity restructuring process 1) Particulars about the share equity restructuring process On March 23rd 2006, the shareholders’ special meeting passed the proposal of share equity restructuring plan, which was: increase 28,696,080 shares to negotiable A-share holders, the non-negotiable shares were thus granted the right to become negotiable. In the newly added capital shares of negotiable A-shares, after deducting of 7,980,000 shares collectable due to expanding of capital shares, the balance of 20,716,080 shares were the equal-value shares offered by the non-negotiable share holders to the negotiable A-share holders. This plan was accomplished on April 10th 2006. 2) Fulfilling of commitments In the report term, the first lot of conditional shares amounted to 37,191,600 were released for trading on April 25, 2007. The former holder of non-negotiable A-shares had promised in the Revised Prospectus of Share Equity Relocating of China Fangda Group Co., Ltd.: (1) It will not trade or transfer the shares held within 12 months since the implementing of the relocation plan; (2) The former holder of non-negotiable A-shares of over 5% of the total capital shares, upon expiration of above condition, place the non-negotiable shares in Shenzhen Stock Exchange. The amount of shares put into trading shall not exceed 5% of the total in 12 months, and 10% of the total in 24 months. The commitments were in processing. 9. Employing and dismissing of CPAs As approved at the 15th meeting of the 4th term of Board and the Shareholders’ Annual Meeting 2006, it has been decided to extend the services of Ascenda Certified Public Accountants and Morison Heng CPAs as the domestic and overseas auditors for 2007 respectively. According to the “Circular about Auditing Issues of B share PLCs” (Zheng-Jian-Kuai-Ji-Zi [2007]30) dated September 12, 2007 issued by CSRC, the Company conducted no overseas auditing for year 2007. This is the 2nd time Ascenda Certified Public Accountants has provided auditing service to the 第 35 页 Company. The Company has paid Ascenda Certified Public Accountants RMB600 thousand (travelling expenses exclusive) in the report term. 10. In the report term, none of the directors, supervisors, executives, shareholders, substantial dominators, buyer of the Company was investigated by relative departments, executed by legal & discipline departments, delivered to legal departments, appeared for crime, investigated or punished by China Securities Regulatory Commission, restricted to security market, criticized publicly, regarded as improper person, punished by other executive departments, or publicly condemned by the Stock Exchange. 11. No invalid trading of the Company’s shares by any of the directors, supervisors, executives or shareholders holding 5% or over of the Company’s shares. On April 27, 2007, due to operational fault, Shenzhen Banglin Technologies Development Co., Ltd. – the first shareholder of the Company has bought 35 thousand shares of the Company, which made a gain of RMB5588.05. The Board of Director has retrieved the gain under the Company’s possess on May 31, 2007. 12. Reception of investigation and visiting: Main content involved and material Time/date Place Way Visitors provided August 10, The Onsite Natio Business operation and future 2007 Company investigation Securities development. The Company follows “Shenzhen Stock Exchange PLC Fair Information Disclosure Guide”, “Information Disclosure Administrative Rules” and “Reception and Promotion Rules” and related laws and regulations. At reception of investigations and visiting and inquiries of the investors, no selective disclosure, private disclosure, advance disclosure to particular object, or leaking of undisclosed major information happened. The fairness of information disclosure was guaranteed. 13. Material events judged by the Board of Directors or according to Article 67 of Securities Law, and Article 17 of “Information Disclosure Criteria of PLCs (Trial)” (1) The 14th meeting of the 4th term of Board and the 1st Shareholders’ Special Meeting 2007 have adopted the proposal on altering the CPA for year 2007. The resolutions were announced with China Securities Journal, Shanghai Securities Daily, Securities Times and Hong Kong Commercial Daily dated December 23, 2006 and January 9, 2007. (2) The 15th meeting of the 4th term of Board and the Shareholders’ Annual Meeting 2006 have adopted the proposals about capitalizing of common reserves and revising of the Articles of Association. The resolutions were announced with China Securities Journal, Shanghai Securities Daily, Securities Times and Hong Kong Commercial Daily dated March 20, 2007 and April 10, 2007. (3) On May 9, 2007, the Company released public notices on China Securities Journal, Shanghai Securities Daily, Securities Times and Hong Kong Commercial Daily about engaging of the curtain wall supplying contract with value of Australian Dollar 100 million. (4) The 20th meeting of the 4th term of Board and the 2nd Shareholders’ Special Meeting 2007 adopted the proposal on revising of the Articles of Association. The resolutions were announced with China Securities Journal, Shanghai Securities Daily, Securities Times and Hong Kong Commercial Daily dated July 21, 2007 and August 7, 2007. (5) The 18th, 21th meeting of the 4th term of Board and the 3rd Shareholders’ Special Meeting 2007 adopted the proposal on investing to establish a joint venture of semiconductor lighting projects in Shenyang. The resolutions were announced with China Securities Journal, Shanghai Securities Daily, 第 36 页 Securities Times and Hong Kong Commercial Daily dated June 5, 2007, September 6, 2007, and September 22, 2007. X. Financial Report 1. Auditors’ Report Ascenda Certified Public Accountants issued standard Auditors’ Report without qualified opinion on the Company’s Financial Report 2007. 2. Financial Statements (Attached) 3. Notes to Financial Statements (enclosed) XI. Documents For Reference 1. The original of Annual Report 2007 carrying the signature and seal of the Chairman of the Board (in both Chinese and English); 2. Financial Statement carrying the signatures and seals of legal representative and financial officer; 3. Original copy of the Auditors’ Report under the seal of the CPA and signed by and under the seal of certified accountants. 4. Originals of all documents and manuscripts of Public Notices of the Company disclosed in public in the newspapers as designated by China Securities Regulatory Commission. The Chairman:Xiong Jinaming The Board of Directors of China Fangda Group Co., Ltd. April 18, 2008 第 37 页 Auditors’ Report 天健华证中洲审（2008）GF 字第 020068 号 To the Shareholders of China Fangda Group Co., Ltd., We have audited the Financial Statements of China Fangda Group Co., Ltd. (“Fangda Group”) attached hereafter, including the Balance Sheet and Consolidated Balance Sheet ended December 31, 2007 and the Income Statement, Consolidated Income Statement, Cash Flow Statement, Consolidated Cash Flow Statement, Statement on Change of Shareholders’ Equity, Consolidated Statement on Change of Shareholders’ Equity, and Notes to the Financial Statements. I. Executives’ responsibilities on the Financial Statements Preparing of the Financial Statements according to Enterprise Accounting Standard issued by the Ministry of Finance on February 15, 2006 is the responsibility of the management of Fangda Group. This responsibility is including: (1) Design, implement and maintain the internal control system related to producing of the Financial Statements, to prevent the Financial Statements from major false presentation due to cheating or error; (2) Select and use of appropriate accounting policies; (3) Make reasonable estimations. II. Responsibilities of the CPA Our responsibilities are to issue auditing opinions on the Financial Statements basing on the auditing works we’ve done on them. We carried out the auditing works with compliance to Chinese CPA Auditing Standard, which requires us to plan and implement our works with professional ethic standards, and obtain reasonable guarantee that the Financial Statements are free of major false statements. Auditing works are involving in auditing practices to obtain evidences regarding the amounts and presentation of the Financial Statements. Selecting of auditing practices is based on the CPA’s judgment, including evaluation on the risks of major false statements due to cheating or error. At evaluating of the risks, we’ve considered the relative internal control system related to the preparation of the Financial Statements. However we don’t comment on the effectiveness of the internal control system. The auditing works also include evaluations on the felicitousness of accounting policy selecting, the rationality of accounting estimations, and the overall presentation of the Financial Statements as well. We believe that the evidences we’ve obtained are appropriate and sufficient, which provided foundations to our issuing of auditing opinions. 第 38 页 III. Auditors’ Opinion We believe that Fangda Group has been following with the Enterprise Accounting Standard published by the Ministry of Finance on February 15, 2006 in preparing of the Financial Statements. The Financial Statements is reflecting, in all important aspects, the financial situation of Fangda Group as of December 31, 2007, and the business performance and cash flow of year 2007. CPA China Ascenda Certified Public Accountants Xiong Jianyi Beijing, China CPA China Zhou Junchao Date of report: April 18, 2008 第 39 页 Balance Sheet Dec. 31 2007 会企 01 表 Prepared by: China Fangda Group Co., Ltd. In RMB Notes Consolidated Parent company Balance at the Assets Parent Balance at the Balance at the Balance at the Consolidated beginning of company end of term end of term beginning of year year Current asset: Monetary fund 1 171,607,741.24 123,714,024.86 2,608,321.55 14,945,658.66 Settlement provision - - - - Outgoing call loan - - - - Trading financial assets - 200,000.00 - - Notes receivable 2 2,144,441.42 369,000.00 - - Account receivable 3 45 276,751,473.17 342,046,757.77 59,101,758.10 82,812,141.30 Prepayment 4 11,384,014.12 17,155,062.23 2,533,879.38 3,872,222.98 Insurance receivable - - - - Reinsurance receivable - - - - Provisions of Reinsurance - - - - contracts receivable Interest receivable - - - - Dividend receivable - - - - Other account receivable 5 46 36,063,260.79 25,661,514.71 214,641,721.45 91,804,346.85 Repurchasing of financial assets - - - - Inventories 6 95,709,965.96 101,483,784.74 2,833,466.97 14,459,232.75 Non-current asset due in 1 year - - - - Other current asset - - - - Total of current asset 593,660,896.70 610,630,144.31 207,893,602.54 281,719,147.45 Non-current assets Loans and payment on other’s - - - - behalf disbursed Disposable financial asset 7 81,678,821.05 16,503,989.67 - - Expired investment in possess - - - - Long-term receivable - - - - Long-term share equity 8 47 4,500,000.00 1,500,000.00 313,633,039.23 investment 363,774,960.00 Property investment 9 265,461,218.62 223,029,458.35 216,099,456.35 257,611,057.62 Fixed assets 10 290,883,402.37 304,941,946.38 50,100,169.79 108,016,852.50 Construction in process 11 562,672.60 155,452.00 - - Engineering material - - - - Fixed asset disposal - - - - Production physical assets - - - - Gas & petrol - - - - Intangible assets 12 59,907,005.27 19,957,840.05 11,165,600.75 13,045,638.60 R&D expense 13 1,696,494.43 - - - Goodwill 14 8,197,817.29 1,031,411.20 - - Long-term prepaid expenses - 30,750.00 - - Differed income tax asset 15 10,355,544.04 7,810,416.71 - - Other non-current asset - - - - Total of non-current assets 723,242,975.67 574,961,264.36 650,794,986.68 682,651,788.16 Total of assets 1,316,903,872.37 1,185,591,408.67 858,688,589.22 964,370,935.61 Legal Representative: Mr. Xiong Jianming Accounting Superior: Mr. Lin Kebing Head of Accounting Dept. Mr. Lin Kebing 第 40 页 Consolidated Balance Sheet (Cont.) Dec. 31 2007 会企 01 表 Prepared by: China Fangda Group Co., Ltd. In RMB Notes Consolidated Parent company Liabilities and owners’ equity (or Parent Balance at Balance at the Balance at Balance at the shareholders’ equity) Consolidated company the end of term beginning of year the end of term beginning of year Current liabilities Short-term loans 18 165,000,000.00 421,352,390.00 10,000,000.00 120,000,000.00 Loan from Central Bank - - - - Deposit received and hold for others - - - - Call loan received - - - - Trade off financial liabilities - - - - Notes payable 19 54,751,865.74 38,141,544.89 - 10,000,000.00 Account payable 20 117,241,376.77 133,567,698.13 3,870,241.38 12,048,388.53 Prepayment received 21 66,983,683.48 50,635,531.06 798,939.90 5,923,109.51 Selling of repurchased financial assets - - - - Fees and commissions receivable - - - - Employees’ wage payable 22 3,996,570.07 8,045,758.56 - - Tax payable 23 18,759,988.17 15,778,377.34 1,742,074.08 1,108,374.19 Interest payable 449,392.50 - 449,392.50 - Dividend payable - - - - Other account payable 24 23,426,039.07 17,602,859.13 192,273,165.73 180,036,750.01 Reinsurance fee payable - - - - Insurance contract provision - - - - Entrusted trading of securities - - - - Entrusted selling of securities - - - - Non-current liability due in 1 year - - - - Other current liability 25 2,623,887.53 8,400,000.00 2,383,379.24 4,800,000.00 Total of current liability 453,232,803.33 693,524,159.11 211,517,192.83 333,916,622.24 Non-current liabilities Long-term borrowings 26 198,000,000.00 - 198,000,000.00 - Bond payable - - - - Long-term payable - - - - Special payable - - - - Expected liabilities 27 - 2,000,000.00 - - Differed income tax liability 28 12,108,590.11 176,243.20 - - Other non-recurring liabilities - - - - Total of non-current liabilities 210,108,590.11 2,176,243.20 198,000,000.00 - Total of liability 663,341,393.44 695,700,402.31 409,517,192.83 333,916,622.24 Shareholders’ equity Share capital 29 387,987,600.00 352,716,000.00 387,987,600.00 352,716,000.00 Capital reserves 30 145,358,857.54 108,881,471.81 70,956,956.18 106,228,556.18 Less: Shares in stock - - - - Surplus reserves 31 6,388,697.44 35,402,732.12 6,388,697.44 35,402,732.12 Common risk provision - - - - Retained profit 32 42,184,655.09 -11,215,403.21 89,520,489.16 30,424,678.68 Different of foreign currency translation - -240,040.87 - - Total of owner’s equity belong to the 581,919,810.07 485,544,759.85 554,853,742.78 524,771,966.98 parent company Minor shareholders’ equity 33 71,642,668.86 4,346,246.51 - Total of owners’ equity 653,562,478.93 489,891,006.36 554,853,742.78 524,771,966.98 Total of liabilities and owners’ equity 1,316,903,872.37 1,185,591,408.67 964,370,935.61 858,688,589.22 Legal Representative: Mr. Xiong Jianming Accounting Superior: Mr. Lin Kebing Head of Accounting Dept. Mr. Lin Kebing 第 41 页 Income Statement Year 2007 会企 02 表 Prepared by: China Fangda Group Co., Ltd. In RMB Note Consolidated Parent company Amount of Amount of Amount of Amount of Items Parent Consolidated the Current the Previous the Current the Previous company Term Term Term Term I. Total revenue 640,246,885.64 702,817,644.34 73,127,558.88 201,370,565.29 Incl. Business income 34 48 640,246,885.64 702,817,644.34 73,127,558.88 201,370,565.29 Interest income - - - - Insurance fee earned - - - - Fee and commission received - - - - II. Total business cost 677,081,305.13 711,000,831.43 85,122,641.12 205,450,825.96 Incl. Business cost 34 48 536,294,233.72 606,648,036.60 59,404,952.68 193,429,790.97 Interest expense - - - - Fee and commission paid - - - - Insurance discharge payment - - - - Net claim amount paid - - - - Net insurance policy reserves provided - - - - Insurance policy dividend paid - - - - Reinsurance expenses - - - - Business tax and surcharge 35 14,984,340.29 12,440,678.95 2,294,226.19 2,396,211.81 Sales expense 21,126,765.08 21,941,624.61 909,966.79 - Administrative expense 64,749,937.04 58,567,319.82 15,849,228.12 11,467,422.58 Financial expenses 36 27,991,185.35 21,687,074.71 8,793,912.68 8,225,683.66 Asset impairment loss 37 11,934,843.65 -10,283,903.26 -2,129,645.34 -10,068,283.06 Plus: Gains from change of fair value 38 (“-“ for loss) 42,431,760.27 8,516,386.19 41,511,601.27 7,803,470.84 Investment gains (“-“ for loss) 39 379,279.76 513,516.86 -4,329,886.23 2,291,003.80 Incl. Investment gains from affiliates - - - - Gains from currency exchange (“-“ for loss) - - - - III. Operation profit (“-“ for loss) 5,976,620.54 846,715.96 25,186,632.80 6,014,213.97 Plus: Non business income 40 21,572,038.08 22,907,665.82 4,659,468.10 7,644,342.06 Less: Non-business expenses 41 3,698,134.85 3,576,210.43 52,085.00 537,202.38 Incl. Loss from disposal of non-current assets - 200,477.00 - 3,605.38 IV. Total profit (“-“ for total loss) 23,850,523.77 20,178,171.35 29,794,015.90 13,121,353.65 Less: Income tax expenses 42 352,443.26 366,514.55 -287,759.90 - V. Net profit (“-“ for net loss) 23,498,080.51 19,811,656.80 30,081,775.80 13,121,353.65 Net profit attributable to the owners of parent company 24,386,023.62 20,610,993.31 - Minor shareholders’ equity 43 -887,943.11 -799,336.51 - - VI. Earnings per share: (I) Basic earnings per share 0.06 0.06 0.08 0.04 (II) Diluted earnings per share 0.06 0.06 0.08 0.04 Legal Representative: Mr. Xiong Jianming Accounting Superior: Mr. Lin Kebing Head of Accounting Dept. Mr. Lin Kebing 第 42 页 Cash Flow Statement Year 2007 Prepared by: China Fangda Group Co., Ltd. In RMB Note Consolidat Items Parent Amount of the Am Consolidated company Current Term Pre I. Net cash flow from business operation Cash received from sales of products and providing of services 706,343,586.70 75 Net increase of customer deposits and capital kept for brother company - Net increase of loans from central bank - Net increase of inter-bank loans from other financial bodies - Cash received against original insurance contract - Net cash received from reinsurance business - Net increase of client deposit and investment - Net increase of trade financial asset disposal - Cash received as interest, processing fee, and commission - Net increase of inter-bank fund received - Net increase of repurchasing business - Tax returned 5,042,867.35 Other cash received from business operation 45,647,337.28 5 Sub-total of cash inflow from business activities 757,033,791.33 80 Cash paid for purchasing of merchandise and services 542,618,330.84 61 Net increase of client trade and advance - Net increase of savings in central bank and brother company - Cash paid for original contract claim - Cash paid for interest, processing fee and commission - Cash paid for policy dividend - Cash paid to staffs or paid for staffs 49,105,950.73 4 Taxes paid 23,794,526.56 2 Other cash paid for business activities 59,619,533.77 3 Sub-total of cash outflow from business activities 675,138,341.90 72 Cash flow generated by business operation, net 81,895,449.43 8 II. Cash flow generated by investing Cash received from investment retrieving 200,000.00 Cash received as investment gains 2,069,943.32 Net cash retrieved from disposal of fixed assets, intangible assets, and other long-term assets 6,794,128.00 Net cash received from disposal of subsidiaries or other operational units Other investment-related cash received 976,156.58 Sub-total of cash inflow from investment 10,040,227.90 Cash paid for construction of fixed assets, intangible assets and other long-term assets 14,859,831.07 2 Cash paid as investment 12,919,481.00 第 43 页 Net increase of loan against pledge - Net cash received from subsidiaries and other operational units - Other cash paid for investment activities 2,857,043.23 Sub-total of cash outflow due to investment activities 30,636,355.30 2 Net cash flow generated by investment -20,596,127.40 -1 III. Cash flow generated by financing Cash received as investment 50,000,000.00 Incl. Cash received as investment from minor shareholders 50,000,000.00 Cash received as loans 799,000,000.00 61 Cash received from bond placing - Other financing-related cash received - Subtotal of cash inflow from financing activities 849,000,000.00 61 Cash to repay debts 831,429,520.48 63 Cash paid as dividend, profit, or interests 28,165,634.96 2 Incl. Dividend and profit paid by subsidiaries to minor shareholders - Other cash paid for financing activities - Subtotal of cash outflow due to financing activities 859,595,155.44 65 Net cash flow generated by financing -10,595,155.44 -3 Influence of exchange rate fluctuate on cash and cash equivalents -65,304.34 V. Net increase of cash and cash equivalents 50,638,862.25 2 Plus: Balance of cash and cash equivalents at the beginning of term 65,836,850.44 4 VI. Balance of cash and cash equivalents at the end of term 116,475,712.69 6 Legal Representative: Mr. Xiong Jianming Accounting Superior: Mr. Lin Kebing Head of Accounting Dept. Mr. Lin Kebing 第 44 页 Consolidated Statement of Change in Shareholders’ Equity Prepared by: China Fangda Group Co., Ltd. Year 2007 RMB 会企 04 表 Amount of current year Owners’ Equity Attributable to the Parent Company Share Items Capital Less: Shares Surplus Common risk Retained reserves in stock reserves provision profit capital I. Balance at the end of last year 352,716,000.00 108,881,471.81 - 35,402,732.12 - -11,215,403.21 Plus: Change of accounting policy - - - Correcting of previous errors - - - - II. Balance at the beginning of current year 352,716,000.00 108,881,471.81 - 35,402,732.12 - -11,215,403.21 III. Changed in the current year (“-“ for decrease) 35,271,600.00 36,477,385.73 - -29,014,034.68 - 53,400,058.30 (I) Net profit - - - - - 24,386,023.62 (II) Gains/losses accounted into owners’ equity directly - 71,748,985.73 - - - - 1. Change in fair value of sellable financial assets, net - 53,423,612.57 - - - - 2. Influence of change in other owners’ equity of invested enterprises on equity basis - 18,325,373.16 - - - - 3. Influence of income tax related to owners’ equity items - - - - - - 4. Others - - - - - - Total of (I) and (II) - 71,748,985.73 - - - 24,386,023.62 (III) Investment or decreasing of capital by owners - - - - - - 1. Capital inputted by owners - - - - - - 2. Amount of shares paid and accounted as owners’ equity - - - - - - 3. Others - - - - - - (IV) Profit allotment - - - 3,008,177.58 - -3,008,177.58 1. Providing of surplus reserves - - - 3,008,177.58 - -3,008,177.58 2. Common risk provision - - - - - - 3. Allotment to the owners (or shareholders) - - - - - - 3. Others - - - - - (V) Internal transferring of owners’ equity 35,271,600.00 -35,271,600.00 - -32,022,212.26 - 32,022,212.26 1. Capital reserves transferred to share capital 35,271,600.00 -35,271,600.00 - - - - 2. Surplus reserves transferred to share capital - - - - - - 第 1 页 3. Making up losses by surplus reserves - - - -32,022,212.26 - 32,022,212.26 4. Others - - - - - - IV. Balance at end of this year 387,987,600.00 145,358,857.54 - 6,388,697.44 - 42,184,655.09 Legal Representative: Mr. Xiong Jianming Accounting Superior: Mr. Lin Kebing Head of Accoun Consolidated Statement of Change in Shareholders’ Equity Prepared by: China Fangda Group Co., Ltd. Year 2007 In RMB 会企 04 表 Amount of Last Year Owners’ Equity Attributable to the Parent Company Items Less: Capital Surplus Common risk Share capital Shares in Retained pro reserves reserves provision stock I. Balance at the end of last year 296,400,000.00 164,427,617.04 - 61,228,622.41 - -104,877,420. Plus: Change of accounting policy - - - -27,138,025.66 - 74,363,159. Correcting of previous errors - - - - - II. Balance at the beginning of current year 296,400,000.00 164,427,617.04 - 34,090,596.75 - -30,514,261. III. Changed in the current year (“-“ for 56,316,000.00 -55,546,145.23 - 1,312,135.37 - 19,298,857. decrease) (I) Net profit - - - - - 20,610,993. (II) Gains/losses accounted into owners’ equity - 769,854.77 - - - directly 1. Change in fair value of sellable financial assets, - 559,559.56 - - - net 2. Influence of change in other owners’ equity of - 210,295.21 - - - invested enterprises on equity basis 3. Influence of income tax related to owners’ equity - - - - - items 4. Others - - - - - Total of (I) and (II) - 769,854.77 - - - 20,610,993. (III) Investment or decreasing of capital by owners - - - - - 1. Capital inputted by owners - - - - - 2. Amount of shares paid and accounted as owners’ - - - - - equity 3. Others - - - - - (IV) Profit allotment - - - 1,312,135.37 - -1,312,135. 1. Providing of surplus reserves - - - 1,312,135.37 - -1,312,135. 2. Common risk provision - - - - - 3. Allotment to the owners (or shareholders) - - - - - 3. Others - - - - - (V) Internal transferring of owners’ equity 56,316,000.00 -56,316,000.00 - - - 1. Capital reserves transferred to share capital 56,316,000.00 -56,316,000.00 - - - 2. Surplus reserves transferred to share capital - - - - - 3. Making up losses by surplus reserves - - - - - 4. Others - - - - - IV. Balance at end of this year 352,716,000.00 108,881,471.81 - 35,402,732.12 - -11,215,403. Legal Representative: Mr. Xiong Jianming Accounting Superior: Mr. Lin Kebing Head of Accoun Statement of Change in Shareholders’ Equity Prepared by: China Fangda Group Co., Ltd. Year 2007 Amount of current year Less: Items Capital Surplus Retained Totalofowners’ Capital L Share capital Shares in Share capital reserves reserves profit equity reserves stock I. Balance at the end of last year 352,716,000.00 106,228,556.18 - 35,402,732.12 30,424,678.68 524,771,966.98 352,716,000.00 108,081,871.38 Plus: Change of accounting policy - - - - -1,773,317.56 Correcting of previous errors - - - - - - - - II. Balance at the beginning of 352,716,000.00 106,228,556.18 - 35,402,732.12 30,424,678.68 524,771,966.98 352,716,000.00 106,308,553.82 current year III. Changed in the current year 35,271,600.00 -35,271,600.00 - -29,014,034.68 59,095,810.48 30,081,775.80 - -79,997.64 (“-“ for decrease) (I) Net profit - - - - 30,081,775.80 30,081,775.80 - - (II) Gains/losses accounted into - - - - - - - -79,997.64 owners’ equity directly 1. Change in fair value of sellable - - - - - - - - financial assets, net 2. Influence of change in other owners’ equity of invested - - - - - - - -119,593.60 enterprises on equity basis 3. Influence of income tax related - - - - - - - - to owners’ equity items 4. Others - - - - - - - 39,595.96 Total of (I) and (II) - - - - 30,081,775.80 30,081,775.80 - -79,997.64 (III) Investment or decreasing of - - - - - - - - capital by owners 1. Capital inputted by owners - - - - - - - - 2. Amount of shares paid and - - - - - - - - accounted as owners’ equity 3. Others - - - - - - - - (IV) Profit allotment - - - 3,008,177.58 -3,008,177.58 - - - 1. Providing of surplus reserves - - - 3,008,177.58 -3,008,177.58 - - - 2.Allotment to the owners (or - - - - - - - - shareholders 3. Others - - - - - - - - (V) Internal transferring of 35,271,600.00 -35,271,600.00 - -32,022,212.26 32,022,212.26 - - - owners’ equity 1. Capital reserves transferred to 35,271,600.00 -35,271,600.00 - - - - - - share capital 2. Surplus reserves transferred to - - - - - - - - share capital 3. Making up losses by surplus - - - - - - reserves 32,022,212.26 32,022,212.26 4. Others - - - - - - - - IV. Balance at end of this year 70,956,956.18 - 6,388,697.44 54,853,742.78 52,716,000.00 387,987,600.00 89,520,489.16 106,228,556.18 Legal Representative: Mr. Xiong Jianming Accounting Superior: Mr. Lin Kebing Head of Accounting Dept. Mr. Lin K Statement of adjusted items in the Income Statement January 1 – December 31 2006 RMB Items Not adjusted Adjusted Operation cost 606,648,036.60 606,648,036.60 Sales expense 21,941,624.61 21,941,624.61 Administrative expense 54,088,231.31 58,567,319.82 Income from change of fair value 0.00 8,516,386.19 Investment income 650,501.15 513,516.86 Income tax 0.00 366,514.55 Business tax and surcharge 11,247,158.02 12,440,678.95 Asset impairment loss 0.00 -10,283,903.26 Net profit 7,187,475.63 20,610,993.31 Statement of adjustment on difference of net profit In RMB Yuan Items Amount 2006.1.1—12.31 Net profit (under former accounting standard) 7,986,812.14 Plus: Total of influence by retrospective adjustment 12,624,181.17 Incl. Business cost Sales expense Administrative expense Income from change of fair value 13,127,680.01 Investment income -136,984.29 Income tax -366,514.55 Others Less: Influence on minority shareholders’ gain/loss by retrospective adjustment 2006.1.1—12.31 Net profit attributable to the owners of parent company (under new 20,610,993.31 accounting standard) Reference information with assumption of the new accounting standard is fully implemented I. Plus: Total of influences of other items Incl. R&D expenses Gain/loss from debt reorganization Gain/loss from non-monetary assets Investment income Income tax Others II. Influence of retrospective adjustment on minority shareholders’ gain/loss III. Plus: Minor shareholders’ equity presented in original financial statements -799,336.51 2006.1.1—12.31 Simulative net profit 19,811,656.80 第 1 页