深南电Ｂ(200037)2007年年度报告（英文版）

深圳南山热电股份有限公司 SHENZHEN NANSHAN POWER CO., LTD. Annual Report 2007 Notice No.: 2008-013 April 17, 2008 Important Notes Board of Directors and the Supervisory Committee of Shenzhen Nanshan Power Co., Ltd. (hereinafter referred to as the Company) and its directors, supervisors and senior executives hereby confirm that there are no any fictitious statements, misleading statements, or important omissions carried in this report, and shall take all responsibilities, individual and/or joint, for the reality, accuracy and completion of the whole contents. Vice Chaiman Li Li and Director Huang Fuhan did not attend the meeting due to business and authorized Director Huang Shaoji and Yu Chunling to participate in meeting and exert the voting rights. PricewaterhouseCoopers Zhongtian Certified Public Accountants audited the Company’s financial report and issued the standard unqualified Auditor’s Report for the Company. Chairman of the Board Wei Wende, Director General Manager Fu Bo, CFO Lu Xiaoping and Head of Financial Dept. Gan Baoshan hereby confirm that the Financial Report enclosed in Annual Report 2007 is authentic and complete. The Annual Report 2007 was prepared in both Chinese and English. Should there be any difference in interpretation of the two versions, the Chinese version shall prevail. Contents Ⅰ. Company Profile---------------------------------------------------------------------------2 Ⅱ. Summary of Accounting Highlight and Bussiness Highlight ------------------ - 3 Ⅲ. Changes in Share Capital & Particulars about Shareholders--------------------6 Ⅳ. Particulars about Directors, Supervisors, Senior Executives & Employees-- 11 Ⅴ. Administrative Structure---------------------------------------------------------------- 20 Ⅵ. Particulars about Shareholders’ General Meetings------------------------------ -26 Ⅶ. Report of the Board of Directors------------------------------------------------------ 27 Ⅷ. Report of the Supervisory Committee------------------------------------------------38 Ⅸ. Significant Events-------------------------------------------------------------------------40 Ⅹ. Financial Report--------------------------------------------------------------------------47 Ⅺ. Documents Available for Documents-------------------------------------------------47 1 I. Company Profile 1. Legal Name in Chinese: 深圳南山热电股份有限公司 Legal Name in English: SHENZHEN NANSHAN POWER CO., LTD. 2. Legal Representative: Wei Wende 3. Secretary of the Board of Directors: Hu Qin Tel : (86)755-26948888 Fax: (86)755-26003684 E-mail: investor@nspower.com.cn Contract Address: 16/F-17/F, Hantang Building, OCT, Nanshan District, Shenzhen, China 4. Registered Address: No.18, Yueliangwan Avenue, Nanshan District, Shenzhen, China Post Code: 518052 Office Address: 16/F-17/F, Hantang Building, OCT, Nanshan District, Shenzhen, China Post Code: 518053 Web site of the Company: http://www.nsrd.com.cn E-mail: public@nspower. com.cn 5. Newspapers Designated for Disclosing Information of the Company: Securities Times, China Securities and Hong Kong Wen Wei Po Internet Web Site Designated by China Securities Regulatory Commission for Publishing the Annual Report: http: //www.cninfo.com.cn Place Where the Annual Report is Prepared and Placed: Secretariat of the Board 6. Stock Exchange Listed with: Shenzhen Stock Exchange Short Form of the Stock and Stock Code: Shen Nan Dian A 000037 Shen Nan Dian B 200037 7. Other Relevant Information: Initial Registration Date: April 6, 1990 Initial Registration Place: Nanshan Jiaozui, Nanshan District, Shenzhen Registration Place after the Change: No.18 Yueliangwan Avenue, Nanshan District, Shenzhen (due to change of the road number) Registered number of the corporate business license for enterprise legal person: 440301501125497 Registration Number of Tax.: GTF Zi No.440305930100069（14） Names and office addresses of Certified Public Accountants engaged: PricewaterhouseCoopers Zhongtian Certified Public Accountants Address: 11/F, PricewaterhouseCoopers Center, No.202, Hubin Road, Shanghai, China 8. Interpretations The Company: Shenzhen Nanshan Power Co., Ltd. Xiefu Company: Shenzhen Xiefu Oil Supply Co., Ltd., whose 50% shares are held by the Company. New Power Company: Shenzhen New Power Industrial Co., Ltd. whose 100% shares are held by the Company directly and indirectly. Syndisome Company: the wholly-owned overseas subsidiary, namely HongKong Syndisome Co., Ltd.. Shennandian Engineering Company: Shenzhen Shennandian Gas Engines Engineering Technology Co., Ltd, wholly funded subsidiary of the Company. Shennandian (Zhongshan) Company: Shennandian (Zhongshan) Electric Power Co., Ltd., whose 80% shares are directly and indirectly held by the Company. Shennandian (Dongguan) Company: Shennandian (Dongguan) Weimei Electric Power Co., Ltd, whose 70% shares are directly and indirectly held by the Company. 2 Tongling Wanneng Company: Anhui Province Tongling Wanneng Power Generation Co., Ltd., whose 3.8% shares are held by the Company. Energy Envionment Protection Company: Shenzhen Energy Envionment Protection Engineering Co., Ltd., whose 10% shares are held by the Company. Nanshan Power Plant: the secondary company of the Company, namely Nanshan Power Plant of Shenzhen Nanshan Power Co., Ltd.. Zhongshan Nanlang Power Plant: Zhongshan Nanlang Power Plant of Shennandian (Zhongshan) Electric Power Co., Ltd. Dongguan Gaobu Power Plant: Dongguan Gaobu Power Plant of Shennandian (Dongguan) Weimei Electric Power Co., Ltd. Zhongshan Power Plant: Zhongshan Power Plant Co., Ltd., whose 75% shares are held by the Company. Zhongfa Power Company: Zhongshan Zhongfa Power Co., Ltd., whose 75% shares are held by the Company. Jiangxi Xinchang Company: Jiangxi Zhongdiantou Xinchang Power Co., Ltd., whose 30% shares are held by the Company. CSRC: China Securities Regulatory Commission. Shenzhen Securities Regulatory Office: Shenzhen Securities Regulatory Office of CSRC. Shenzhen Stock Exchange: Shenzhen Stock Exchange Designated Newspapers: Securities Times, China Securities and Hong Kong Wen Wei Po RMB: Unless otherwise specified, the standard currency in the financial data or unit refers to Renminbi. II. Summary of Accounting Highlight and Bussiness Highlight (I) Major accounting data as of the year 2007 Unit: RMB’000 Items Amount Operating profit -411,255 Total profit 94,963 Net profit attributable to shareholders of the listed 118,086 company Net profit attributable to shareholders of the listed company after deducting non-recurring gains and 15,201 losses Net cash flow arising from operating activities 202,670 Items of non-recurring gains and losses and the related amounts: Unit: RMB’000 Items Amount Net profit 97,546 Less: Income from the disposal of noncurernt asset -14,733 Balance of fair value of net asset recognizable by the purchased party obtained from the enterprise -89,065 merger cost and merger process【Note】 Net amount of other non-operating income and 713 expense Engrossed expense of fund received from - nonfinancial enterprisee Influences on inceom tax of noncurrent losses/gains - 3 Net (loss)/profit after deducting the non-recurring -5,539 losses and gains Shareholders attributable to parent company 15,201 Minority shareholders’ equity -20,740 【Note】Measurement characteristics of main asset of the Company The accounting calculation of the Company is taking accrual basis as calculating basis, except for those calculated based on fair value such as the transaction financial asset and financial asset available for sales and the asset of the mergered company in the process of enterprise merger not under the common control; other asset is taking historical cost as the calculating basis. The enterprise merger of the Company under the common control: In Sep.2007, the Company purchased respective 75 percent equities of Zhongshan Power Plant Co., Ltd and Zhongshan Zhongfa Power Co., Ltd held by Zhongshan Power Development Co., Ltd with zero price. Due to wholly-taken in the purchase of the equities, only one computation was confirmed. Thus, on the basis of accouting treating of confirming equity purchasing and purchase was taking in single items. The merger cost of merger enterprise is smaller than the recognizable fair value of net asset enjoyable by the purchasing equity proportion in purchase day amounting to RMB 10,675,000; and obtained in according to the combined values of market method, equity method and cost method. On Nov.19, 2007, Zhongshan Zhongfa Power Co., Ltd signed the Contract on Derating Interest with Bank of China Zhongshan Branch and the amount derated was RMB 64,678,000. On Dec.20, 2007, the Company signed Terminating Contract on Project Priority Right of Income with Zhongshan Zhongfa Power Co., Ltd. The Company quited the technic consulting charge and other items amouting to RMB 43,400,000 payable which was not paid withdrawn on Project Priority Right of Income by Zhongshan Zhongfa Power Co., Ltd before the purchase. The aforesaid items were constituted with the the recognizable fair value of net asset amounting to RMB 89,065,000 obtained from Zhongshan Zhongfa Power Co., Ltd in purchase day. For details, please see the accouting notes IX in financial report. (II) Impact on net profit and net assets after adjustment based on International Accounting Standards In the report period, there were no differences on net profit and net asset between the domestic and international accouoting standards. (III) Major accounting data and financial ratio over the past three years 1. Major accounting data over the past three years Unit: RMB’000 Increase/decreas 2007 e in this year Items 2006 2005 compared with last year (%) Before After Before After After adjustment adjustment adjustment adjustment adjustment Operating income 3,620,124 3,861,752 3,874,579 -6.57 3,030,682 3,030,682 Total profit 94,963 55,036 54,312 74.85 10,106 10,106 Net profit attributable to shareholders of the 118,086 63,466 63,133 87.04 29,920 29,920 listed company 4 Net profit attributable to shareholders of the listed company after 15,201 55,638 55,753 -72.74 -88,858 -88,858 deducting non-recurring gains and losses Net cash flow arising from operating 202,670 -150,709 -131,194 254.48 563,135 563,135 activities Increase/decreas e at the end of At the end of this year Items At the end of 2006 At the end of 2005 2007 compared with that at the end of last year (%) Before After Before After After adjustment adjustment adjustment adjustment adjustment Total assets 5,552,914 4,772,534 4,771,758 16.37 4,230,486 4,230,486 Owners’ equity(Shareholders’ 1,725,019 1,587,157 1,586,824 8.71 1,525,373 1,525,373 equity) 2. Major financial ratio over the past three years Increase/decrease in Items 2007 2006 this year compared 2005 with last year (%) Before After Before After After adjustment adjustment adjustment adjustment adjustment Basic earnings per 0.22 0.12 0.12 83.33 0.05 0.05 share(RMB) Diluted earnings per 0.22 0.12 0.12 83.33 0.05 0.05 share(RMB) Basic earnings per share after deducting non-recurring 0.03 0.10 0.10 -70.00 -0.16 -0.16 gains and losses(RMB) Fully diluted return on equity Up 2.87 percent 6.85 4.00 3.98 1.96 1.96 (%) age points Weighted average return on Up 2.87 6.85 4.00 3.98 1.96 1.96 equity (%) percentage points Fully diluted return on equity Down 2.63 after deducting non-recurring 0.88 3.51 3.51 -5.83 -5.83 percentage points gains and losses (%) Weighted average return on equity after deducting Down 2.63 0.88 3.51 3.51 -5.83 -5.83 non-recurring gains and percentage points losses (%) Net cash flow arising from operating activities per 0.37 -0.28 -0.24 254.17 1.03 1.03 share(RMB) Increase/decrease at the end of this year At the end Items At the end of 2006 compared with that At the end of 2005 of 2007 at the end of last year (%) Before After Before After After adjustment adjustment adjustment adjustment adjustment 5 Net asset per share attributable to shareholders of listed 3.15 2.90 2.90 8.62 2.78 2.78 company(RMB) 4. Supplementary for profit statement in the report period Return on equity (%) Earnings per share(RMB) Diluted Profit in the report period Fully Weighted Basic earnings earnings per diluted average per share share Net profit attributable to common 6.85 6.85 0.22 0.22 shareholders of the company Net profit attributable to common shareholders of the company after deducting the noncurrent losses and 0.88 0.88 0.03 0.03 gains III. Changes in Share Capital & Particulars about Shareholders (I) Changes in share capital 1. Statement of changes in shares (Ended Dec. 31, 2007) Unit: Share Before the Changes Increase/Decrease in the Change (+, -) After the Change Capitali Add Content Propor Rati zation itio Propor Bonus Amount tion oned of nal Other Subtotal Amount tion shares (%) share public issu (%) reserve ing I. Restricted shares 311,798,745 56.90 -82,203,215 -82,203,215 229,595,530 41.90 1. State-owned shares 2.State-owned legal 228,030,210 41.61 -82,194,900 -82,194,900 145,835,310 26.61 person’s shares 3. Other domestic 20,127 0.004 -8,315 -8,315 11,812 0.002 shares Including: Domestic legal person’s shares Domestic natural 20,127 0.004 -8,315 -8,315 11,812 0.002 person’s shares 4. Foreign shares 83,748,408 15.28 83,748,408 15.28 Including: Foreign 83,748,408 15.28 83,748,408 15.28 legal person’s shares Foreign natural person’s shares II. Unrestricted 236,167,253 43.10 +82,203,215 +82,203,215 318,370,468 58.10 shares 1. RMB Ordinary 80,047,982 14.61 +82,203,215 +82,203,215 162,251,197 29.61 shares 6 2.Domestically 156,119,271 28.49 156,119,271 28.49 listed foreign shares 3. Overseas listed foreign shares 4. Others III. Total shares 547,965,998 100 547,965,998 100 【 Note 】 (1) With the approval of Ministry of Commerce of the PRC and CSRC ZJGSZi[2006] No. 230 Notice on Checking on Listing for Trade of Unlisted Foreign-funded Shares of Shenzhen Nanshan Power Co., Ltd., the unlisted foreign-funded shares of the Company totaling up 83,748,408 which were held by the second largest shareholder Hong Kong Nam Hoi (International) Limited has transferred to Tradable Shares of B stock on Oct. 20, 2006; and the shares could be listed on B-stock market for circulation in Shenzhen Stock Exchange after one year since Oct. 20, 2007; and the relevant procedure was under the process. (2) In the report period, other stock structure of the Company changed due to the implementation of Share Merger Reform of the Company; (3) The shares before the changes of Other Domestic Shares in restricted shares were held by former senior executive Sun Shoulin which were all released restrictions for trade with the expiration of half year lock-up period due to his leaving post; the shares after change which were restricted A-shares were held by deputy general manager of the Company Zhang Jie. 2. Statement on changes of restricted shares Unit: Share Restrict Restricted ed Restricted Restricted Date for Name of the restricted shares shares Restricted shares in shares in releasing the shareholders released in increase condition year-begin year-end restriction this year d in this year SHENZHEN GUANGJU Commitm ent of ELECTRONIC 118,800,636 27,398,300 0 91,402,336 Share March 29, 2007 INVESTMENT CO., LTD. Merger Reform HONG KONG NAM HOI (INTERNATIONAL) 83,748,408 0 0 83,748,408 Legal con Oct.20, 2007 dition LIMITED Commitme SHENZHEN ENERGY 59,187,391 27,398,300 0 31,789,091 nt of Share March 29, 2007 GROUP CO., LTD. Merger Reform STATE GRID SHENZHEN Commitme ENERGY DEVELOPMENT 50,042,183 27,398,300 0 22,643,883 nt of Share March 29, 2007 Merger GROUP CO., LTD. Reform SUN SHOU LIN 20,127 20,127 0 0 Legal con June 30, 2007 dition 7 ZHANG JIE 0 0 11,812 11,812 Legal con dition Total 311,798,745 82,215,027 11,812 229,595,530 【Note】Former Shenzhen Grid Technology Development Co., Ltd has been changed its name into STATE GRID SHENZHEN ENERGY DEVELOPMENT GROUP CO., LTD with the approval from GWNYQi [2007] No.1 dated January 5, 2007. (II) Share issuance and listing 1. The Company issued neither any shares nor derived securities over the past three years ended the report period. 2. In the report period, there existed no bonus share, capitalization of public reserve, allotted share, additionally issue new shares, privately issued shares, warrant strike, implementing equity incentive plan, enterprises mergers, capitalization of transferable bond of the Company, decreasing capital, inner employee’s listing and issuing bonds, the total number of the share capital and structure remains unchanged and changes of asset liabilities structure of the Company. . 3. There were no inner employees’ shares in the Company at present. (III) Particulars about the main shareholders ended by the report period 1. Ended by the report period, the Company had totally 34,500 shareholders, of them, 20,331 shareholders of A-share with a decrease of 7,154 over last year, and 14,169 shareholders of B-share with a decrease of 4,641over last year. 2. Particulars about the shares held by the shareholders (Ended as Dec.31, 2007) (Unit: Share) Total amount of 34,500 shareholders Particulars about the shares held by the top ten shareholders Proportion Total Amount of the Amount of Nature of Full Name of shareholder of shares amount of restricted shares pledged or shareholders held shares held shares held frozen SHENZHEN GUANGJU ELECTRONIC State-owned 21.68% 118,800,636 91,402,336 0 INVESTMENT CO., LTD shareholder HONG KONG NAM HOI Foreign-funded 15.28% 83,748,408 83,748,408 0 (INTERNATIONAL) LIMITED shareholder Foreign-funded TENGDA PROPERTY CO., LTD. 11.08% 60,737,449 0 0 shareholder SHENZHEN ENERGY (GROUP) CO., State-owned 10.80% 59,187,391 31,789,091 0 LTD. shareholder STATE GRID SHENZHEN ENERGY State-owned 9.13% 50,042,183 22,643,883 0 DEVELOPMENT (GROUP) CO.,LTD. shareholder MORGAN STANLEY & CO. Foreign-funded 3.34% 18,303,324 0 Unknown INTERNATIONAL PLC shareholder Personal YANG SHI MIN 0.32% 1,739,100 0 Unknown shareholder TOYO SECURITIES ASIA Foreign-funded 0.27% 1,506,398 0 Unknown LIMITED-A/C CLIENT. shareholder Foreign-funded NAITO SECURITIES CO., LTD. 0.27% 1,489,825 0 Unknown shareholder CHINAFAMOUSBRAND SECURITIES Foreign-funded 0.26% 1,400,000 0 Unknown HOLDING CO., LTD. shareholder Particulars about the shares held by the top ten unrestricted shareholders Full Name of shareholder Amount of unrestricted shares held Type of shares TENGDA PROPERTY CO., LTD. 60,737,449 Domestically listed foreign 8 share MORGAN STANLEY & CO. Domestically listed foreign 18,303,324 INTERNATIONAL PLC share Domestically listed foreign YANG SHI MIN 1,739,100 share TOYO SECURITIES ASIA Domestically listed foreign 1,506,398 LIMITED-A/C CLIENT. share Domestically listed foreign NAITO SECURITIES CO., LTD. 1,489,825 share CHINAFAMOUSBRAND SECURITIES Domestically listed foreign 1,400,000 HOLDING CO., LTD. share XU XIAN DA 1,200,000 RMB ordinary share WANG YU ZHEN 1,000,000 RMB ordinary share HSBC BROKING SECURITIES (ASIA) Domestically listed foreign 918,837 LIMITED-CLIENTS A/C share Domestically listed foreign YANG SHI WU 816,300 share 1. Shenzhen Energy (Group) Co., Ltd. holds indirectly 100% Hong Kong Nam Hoi (International) Limited; Explanation on associated relationship2. Yang Shimin and Yang Shiwu are related parties, the among the top ten shareholders or Company did not know whether there were associated consistent action relationships or belonging to consistent actors among other social public shareholders. 3. Particulars about the controlling shareholder The Company has no controlling shareholder. Shenzhen Energy Group Co., Ltd. is the actual largest shareholder of the Company, its legal representative is Gao Zimin; date of foundation: July 15, 1985, registered capital: RMB 955,555,556; enterprise type: company with limited liability; business scope: development, production and purchase and sale of conventionality energy (including electricity, heat, coal, oil and gas) and new energy; design, construction, management and operation of various energy project; facility and its fittings, equipments, aluminum, timber and cement and other raw materials demanded by energy project; operation of import and export business (transacted according to SMGSZ Zi No. 147 document); operating personnel training, consultation prepared for energy projects and other relevant service business (specific projects subject to approval by the authority); technology development, transfer and service of environments protection; investing and operating transportation business (highway, littoral and oceanic) of fuel, raw material and equipment demanded by energy projects, management of property (operated by property management qualification certificate), lease of owned property. Diagram for Control Structure of Shares Held by Main Shareholders of the Company Interpretations for companies’ names: Shennandian: Shenzhen Nanshan Power Co., Ltd. Energy Group: Shenzhen Energy Group Co., Ltd. Hong Kong Energy: Shenzhen Energy (H.K.) Limited NAM HOI: Hong KonogNAM HOI (International) Limited Guangju Electronic: Shenzhen Guangju Electronic Investment Co., Ltd. Hong Kong Tengda: Tengda Property Co., Ltd State Grid Energy: State Grid Shenzhen Energy Development Group Co., Ltd. Guangju Energy: Shenzhen Guangju Energy Co., Ltd. Shennan Petroleum: Shenzhen Petroleum (Group) Co., Ltd. Kehuitong: Shenzhen Kehuitong Investment Holding Co., Ltd. 9 Nanshan District GZW 100% Kehuitong 45.92% Shenzhen GZW Shennan Petroleum Mister Li Li State GZW 75% 36.11% 100% 100% 100% Energy Group Hong Kong Energy Guangju Energy Peace Country International Limited State Grid 100% 90% 100% 77.16% NAM HOI Guangju Electronic Hong Kong Tengda State Grid Energy 10.80% 15.28% 21.68% 11.03% 9.13% Shennandian 4. Brief introduction of legal person shareholders holding over 10% of total shares of the Company (1) Shenzhen Guangju Electronic Investment Co., Ltd. holds 21.68% of the Company’s total shares; legal representative: Zhong Chengli; date of foundation: May 31, 1989; registered capital: RMB 11.11 million; enterprise type: company with limited liability; business scope: initiating industrial enterprises and investment of electric power (specific projects subject to approval by the authority). (2) Hong Kong Nam Hoi (International) Limited holds 15.28% of the Company’s total shares; legal representative: Zhao Xiangzhi; date of establishment: May 15, 1985; business scope: investment. (3) Tengda Property Co., Ltd holds 11.03% of the Company’s total shares; legal representatives: Li Li; date of establishment: August 27, 1980; business scope: property and financial market investment, etc. 10 IV. Particulars about the Directors，Supervisors，Senior Executives and Employees (I) Basic infromation 1. Members of directors in the report period Drawing Total remuneration Shares Shares remuneration Begin date End date Reason from held at held at drawn from the Name Title Sex Age for office for office for shareholders’ year-b year Company in the term term change units or other egin -end report period related units (RMB’0000) or not Chairman WeiWende Male 60 2006.10 2009.10 0 0 0 Yes of the Board Vice Wang Chairman Male 44 2006.10 2009.10 0 0 0 Yes Jianbin of the Board Vice Sun Yulin Chairman Male 56 2006.10 2009.10 0 0 0 Yes of the Board Vice Li Li Chairman Male 64 2006.10 2009.10 0 0 0 Yes of the Board Director Fu Bo & General Male 45 2006.10 2009.10 0 0 81 No Manager Yu Director Female 42 2006.10 2009.10 0 0 0 Yes Chunling Zhong Director Male 60 2006.10 2009.10 0 0 0 Yes Chengli He Yingyi Director Male 51 2006.10 2009.10 0 0 0 Yes Huang Director Male 53 2006.10 2009.10 0 0 0 Yes Fuhan Huang Director Male 44 2006.10 2009.10 0 0 0 Yes Shaoji Huang Independent Male 52 2006.10 2009.10 0 0 15.47 No Sujian Director Zhou Independent Male 52 2006.10 2009.10 0 0 15.47 No Chengxin Director Xu Independent Male 66 2006.10 2009.10 0 0 15.47 No Jing’an Director Yu Independent Male 43 2006.10 2009.10 0 0 15.47 No Xiufeng Director Wu Independent Female 43 2006.10 2009.10 0 0 14.28 No Xiaolei Director Total 0 0 157.16 【Note】(1) In the report period, the Company did not implement the plan of equity encouragement. (2) The remuneration befor tax for Independent Director Huang Sujian, Zhou Chengxin, Xu Jing’an and Yu Xiufeng included the supplemented 2006 annual allowance RMB 100,000 each person (after tax), the remuneration befor tax for Independent Director Wu Xiaolei included the supplemented 2006 annual allowance RMB 18,818.00 (after tax) 11 2. Members of supervisors in the report period Draw the Total remuneration Beginni Terminat Shares Shares remuneration from other ng date ing date held held Reason of drew from the Names Titles Sex Age shareholder of office of office at the at the change Company in the units or term term year-begin year-end report period associates or (RMB’0000) not Chairman Zhu of the Male 58 2006.10 2009.10 0 0 0 Yes Tianfa Supervisory Committee Zhou Supervisor Male 43 2006.10 2009.10 0 0 0 Yes Qun Li Yongshe Supervisor Male 35 2006.10 2009.10 0 0 0 Yes ng Chen Supervisor Female 44 2006.10 2009.10 0 0 0 Yes Lihong Zhang Supervisor Male 48 2006.10 2009.10 0 0 0 Yes Yanmin Wang Employee Male 46 2006.10 2009.10 0 0 35.1 No Wei Supervisor Employee Li Chao Male 36 2006.10 2009.10 0 0 31.5 No Supervisor Yi Employee Male 39 2006.10 2009.10 0 0 35.1 No Yaoping Supervisor Total 0 0 101.7 3. Senior Executives in the report period Total Draw the remuneration remuneration Beginning Shares Shares drew from Terminating Reason from other date of held held the Names Titles Sex Age date of of shareholder office at the at the Company in office term change units or term year-begin year-end the report associates or period not (RMB’0000) Director Fu Bo Male 45 2006.10 2009.10 0 0 81 No & GM Deputy Lin Qing Female 43 2006.12 2009.12 0 0 64.8 No GM Deputy Ji Ming Male 51 2006.12 2009.12 0 0 64.8 No GM Zhang Deputy Female 39 2006.12 2009.12 15,750 15,750 64.8 No Jie GM Deputy Zhu Wei Male 50 2006.12 2009.12 0 0 64.8 No GM Wang General Male 46 2006.12 2009.12 0 0 64.8 No Rendong Engineer Lu CFO Male 45 2006.12 2009.12 0 0 64.8 No Xiaoping Secretary Hu Qin of the Female 40 2006.12 2009.12 0 0 43.0 No Board 12 Total 15,750 15,750 512.8 【Note】The shares of the Company held by Zhang Jie were purchased-in as deputy general manager of the Company, of which 3,938 shares has conformed to the conditions of releasing restriction, and 11, 812 shares belonged to legal restricted shares. 4. Particulars about holding the post of present directors and supervisors in Shareholding Company Name of Shareholding Name Title Office term Company Shenzhen Energy Group Co., Consultant (Deputy GM Wei wende June, 2006 to now Ltd. Ranking) Wang Shenzhen Guangju Energy Co., Chairman of the Board Feb. 1999 to now Jianbin Ltd. State Grid Shenzhen Energy Party branch secretary & Sun Yulin Dec. 1999 to now Development Group Co., Ltd. Deputy General Manager President of the Board of Li Li Tengda Property Co., Ltd. 1992 to now Directors Yu Shenzhen Energy Group Co., Head of Pumped Storage Sep., 2006 to now Chunling Ltd. Preparatory Office Zhong Shenzhen Guangju Electronic Chairman of the Board Sep., 2000 to now Chengli Investment Co., Ltd. State Grid Shenzhen Energy He Yingyi Deputy General Manager 2005 to now Development Group Co., Ltd. Huang Shenzhen Energy Group Co., Deputy General Manager May, 2006 to now Fuhan Ltd. Huang Kalexpcb Industry International Finance Director 2000 to now Shaoji (Group) Co., Ltd Shenzhen Energy Group Co., Zhu Tianfa Chief Accountant Nov., 2001 to now Ltd. General Manager of Huizhou Shenzhen Energy Group Co., Zhou Qun Shenneng Investment Holding 2006 to now Ltd. Co., Ltd. Li Tengda Property Co., Ltd. Manager 1994 to now Yongsheng Chen Shenzhen Guangju Energy Co., Deputy General Manager Jan.1, 2005 to now Lihong Ltd. Deputy Chief Accountant& Zhang State Grid Shenzhen Energy Finance and Internal Audit 2005 to now Yanmin Development Group Co., Ltd. Manager 5. Major work experiences of present directors, supervisors and senior executives and particulars about holding the post or concurrent posts in other units out of Shareholding Company (1) Directors Mr. Wei Wende, Chairman of the Board, Senior Political Engineer, graduated from Navy the No. 1 Aviation University with major of flight driving. From 1968 to 1982, he successively took the posts of political instructor, Deputy Group Leader and Commissar of No. 2 independent group of navy aviation army; from 1982 to 1992, he successively took the posts of Commissar and Manager of CITIC Offshore Helicopter Co., Ltd., Vice-secretary of Party Committee and Secretary of Commission for Discipline Inspection; from 1992 to 1997, Standing Deputy General Manager of Shenzhen Airport Group Company; he took Deputy General Manager since 1997, he concurrently took the post of Chairman of Federation of Labour Unions, Standing Deputy Director of Safety Committee of Shenzhen Energy Group 13 Co., Ltd. Now, he took the post of Consultant (Deputy GM Ranking) of Shenzhen Energy Group Co., Ltd. Mr. Wang Jianbin, Vice Chairman of the Board, Master Degree of MBA. He worked in Shenzhen Shennan Petroleum (Group) Co., Ltd. since 1989, and successively took the posts of Manager of oil product, Assistant General Manager, Deputy General Manager, Director and Vice Chairman of the Board. He now acts as Chairman of the Board of Shenzhen Shennan Petroleum (Group) Co., Ltd. and Chairman of the Board of Shenzhen Guangju Energy Co., Ltd. Mr. Sun Yulin, Director, Senior Engineer. From 1985 to 1999, he successively took the posts of Secretary of Minister of General Office of Ministry of Electricity and Water Conservation, Deputy Division Chief, Secretary of Party Leadership Group of CEC, Deputy General Manager, General Manager and Senior Engineer of CEC Power Industrial Company. He now acts as Deputy General Manager and Member of Party Leadership Group of Shenzhen State Power Science and Technology Development Co., Ltd. and Deputy Director of the State Power Network Corporation Economy Development Liaison Office in Shenzhen. Mr. Li Li, Director, Vice-Chairman, now is President and Executive CEO of the Board and Chairman of Hong Kong Kalexpcb Industry International (Group) Co., Ltd., Chairman of the Board of Tengda Property Co., Ltd. now. He now is a member of Shenzhen of CPPCC and Honor Citizen of Shenzhen, Zhongshan and Guangzhou City. Mr. Fu Bo, Director General Manager, MBA, graduated from Xi'an Air Force Engineering University with major of Aeroengine. From 1984 to 1993, he took the post of Lector of Air Machinery Engineering Department of Xi’an Air Force Engineering University. From Aug. 1993, he successively took the posts of Secretary of General Manager, Deputy Director, Director, and Secretary to the Board of Directors and Deputy General Manager of General Office; since Jan. 2005, he took the post of Director General Manager of the Company, now concurrently holds the position of Chairman of the Board of Shennandian (Zhongshan), Shennandian (Dongguan) and Syndisome Company. Ms. Yu Chunling, Director, Senior Engineer, on-job Master of Economics of Bejing University, graduated from Wuhan University of Hydraulic & Electrical Engineering with major of power station structure engineering. She successively took the posts of Technician of Engineering Department of Guangdong Nuclear Power Joint Venture Co., Ltd., Engineer of Civil Contract, Project Manager of Shenzhen Energy Investment Co., Ltd., Deputy Business Controller, Business Controller and Head of Fuel Trade Department of Office General, Head of Planning and Developing Department and concurrently Party Branch Secretary of Shenzhen Energy Group Co., Ltd. Now she acts as Head of Pumped Storage Preparatory Office and concurrently Party Branch Secretary of Shenzhen Energy Group Co., Ltd. Mr. Zhong Chengli, Director, Engineer, graduated from chemistry department of Hefei University of Technology. From 1989 to 1999, he successively took the posts of Assistant General Manager, Director, Deputy General Manager, Deputy Secretary of party committee, Deputy Secretary of Committee of Discipline Inspection of Shenzhen Shennan Petroleum (Group) Co., Ltd. Now he acts as Director, General Manager; Deputy Secretary of Party Committee of Shenzhen Guangju Energy Co., Ltd. and Chairman of the Board of Shenzhen Guangju Guangju Electronic Investment Co., Ltd.. Mr. He Yingyi, Director, Economist, Bachelor degree of law, graduated from Hebei University with major of Economic Management. He ever worked in the Power Station of the No. 53 Train of Electrical Business Bureau of Ministry of Water and Electricity, Zhejiang Zhenhai Power Plant and Zhejiang Beilun Power Plant, and successively took the posts of Director of Branch Plant, Deputy Factory Head in charge of business. Since 2000, he acts as manager of market dept. of Shenzhen State Power Science & Technology 14 Development Co., Ltd.(Now the company has its new name State Grid Energy Development Group Co., Ltd.). Now he acts as Deputy General Manager of State Grid Energy Development Group Co., Ltd. and cocurrently takes Chairman and General Manager of Shenzhen State Power Science&Trading Group Co., Ltd. Mr. Huang Fuhan, Director, Senior Engineer, Master of Engineering; graduated from Xi’an Thermal Power Research Institute with major of Thermal Energy and Power Engineering. He ever took the post of Deputy Director of Automatization Office of Xi’an Thermal power Research Institute. Since 1995, he successively held the post of Vice-chief Engineer, Deputy Factory Head, Factory Head of Mawan Power Plant of Shenzhen Mawan Power Co., Ltd; Deputy Manager and Director of Maintenance Department of Shenzhen Energy Power Branch Company, Head of Moonbay Gas Turbine Power Plant, General Manager of Shenzhen Nanshan Power Co., Ltd; Manager, Vice-chairman, Deputy Secretary of Party Branch of Guangshen Shajiao B Power Station Co., Ltd ; Director of Preparatory Office of East Power Plant of Shenzhen Energy Group Co., Ltd. Now, he acts the Deputy General Manager, Chief Engineer of Shenzhen Energy Group Co., Ltd. Mr. Huang Shaoji, Director, Senior Member of The Association of Chartered Certified Accountants and The Hong Kong Institute of Certified Public Accountants, also Qualified Chartered Secretary; has the qualifications of ACIS and ACS; and has the 20-years experiences in finance management. Since 2000, he was the Finance Director of Kalexpcb Industry International (Group) Co., Ltd, of which the stocks were listed in Hong Kong Exchanges and Clearing Limited. Mr. Huang Sujian, Independent Director, graduated from Graduate School of the Chinese Academy of Social Sciences with Doctor Degree, Researcher and Doctor Tutor in 1988. Since 1988, he acts as a Researcher in Institute of Industry Economy ofthe Chinese Academy of Social Sciences. Now, he now the Deputy Director, Researcher in Institute of Industry Economy of the Chinese Academy of Social Sciences; Director of Institute of Management and Science of the Chinese Academy of Social Sciences; Doctor Tutor in Graduate School of the Chinese Academy of Social Sciences, Deputy President and President of an Executive Council of China Enterprise Management Association; and concurrently acts as Independent Director of Shenzhen Energy Investment Co.,Ltd., Wolong Electric Group Co.，Ltd., and Director of Zhejiang Jianfeng Group Co., Ltd. Mr. Zhou Chengxin, Independent Director, Juris, graduated from of Law College of Wuhan University, visiting scholar of U.S.A Michigan University. He ever took the post of Lector and Associate Professor in Law College of Wuhan University, Deputy Director, Deputy Researcher of Law and Researcher of Institute of Shenzhen Legal System. Now, he acts the Deputy Director, Deputy Researcher of Law and Researcher of Institute of Shenzhen Legal System；Deputy of Shenzhen 4th People’s Congress and Committee for Legal Affairs; Expert of Shenzhen Expert Consultative Committee; Intercessor of China International Economic and Trade Arbitration Commission and social post of intercessor of Shenzhen, Zhuhai, Shanghai, Nanjing Arbitration Commission; Lawyer of Guangdong Zhong’an Law Firm; Independent Director of several companies including Shenzhen Sanxin Glass Technology Co., Ltd. Mr. Xu Jing’an, Independent Director, Researcher, graduated from Department of Journalism of Fudan University. He successively took the posts of Section Chief of Research Office of the State Development Planning Commission, Division Chief of the State Commission for Economic Restructuring, Deputy Director of China Society of Economic Reform, Director of Shenzhen Municipal Commission for Economic Restructuring and Vice-chairman of Shenzhen Stock Exchange. He now acts as Chairman of the Board of Shenzhen Xu Jing An Investment Advisor Company, President of Institute of Shenzhen New Century Civilization. He once acted as part-time professor of China Renmin University and 15 Shenzhen University. Mr. Yu Xiufeng, Independent Director, Doctor of Law. He ever studied abroad in WASEDA University with Law Department. Now he acts as Director of Deheng Law Office Shenzhen Branch, the Post-doctorate of application Economics of Jilin University, Intercessor of Shenzhen Arbitration Commission, Deputy of Shenzhen 4th People’s Congress, Commissary of Shenzhen 4th People’s Congress and Committee for Legal Affairs, Director and Spokesman of Shenzhen Lawyers Association, Vice-chairman of Shenzhen Chamber of International Investment & Financing, Honorary President of Hong Kong Small and Medium Enterprises General Association, Part-time Researcher of Nanjing University, part-time Master Tutor of Law School of Peking University. Ms. Wu Xiaolei, Independent Director, Doctor of Economics, successively studied in the Xinjiang University, South Western University of Finance and Economics and Nankai University and respectively obtained the degrees of BA, MBA and Doctor of Economics. She successively held the post in Education Research Office and Education Office of Xinjiang Uygur Autonomous Region, Secretary of the Board of Directors, Manager of Securities Department, Deputy General Manager of Shenzhen Wabo Group Co., Ltd., Deputy General Manager, concurrently Secretary of the Board of Directors of Shenzhen Skyworth-RGB Electronics Co., Ltd., and Assistant Chairman of Shenzhen Advanced Science & Technology Enterprise Group. Now, she acts the Executive Vice-president of CMB International Capital Corporation Limited, Deputy Director of Business Supervisory Commission of Investment Bank, concurrently acts the Independent Director and Management Advisory Consultant of Xinjiang West Construction Co., Ltd, Vice-chairman of Shenzhen Association of Management Consultants and Shenzhen Woman Entrepreneurs Association. (2) Members of supervisors Mr. Zhu Tianfa, Chairman of the Supervisory Committee, CPA, graduated from Dongbei University of Finance and Economics. He successively took the posts of Head of Financial Department and Director of Shenzhen Special Economic Zone Power Development Company, Director Accountant, Assistant Head, Deputy Head, Head and Deputy Chief Accountant of Shenzhen Energy Group Co., Ltd.; now he acts as Chief Accountant of Shenzhen Energy Group Co., Ltd. and General Manager of Shenzhen Xibu Power Co., Ltd. Mr. Zhou Qun, Supervisor, Economist, graduated from East China Geological Institute with Bachelor degree. He ever worked in Shenzhen Municipal Geological Bureau, Shenzhen Nanshan District Investment Management Company, Shenzhen Municipal State-owned Assets Office and Shenzhen Investment Holdings Corporation, and successively took the posts of Assistant Engineer, Director of General Office, Deputy Division Chief, and Deputy Secretary of Secretariat of the Board. From 2001, he held the post of Secretary of the Board, Assistant President and concurrently took post of Director of General Office of Shenzhen Energy Group Co., Ltd; Director of Preparatory Office of Shenzhen Pumped Storage Power Station. Now, he acts the Party Member of Shenzhen Energy Group Co., Ltd, Executive Director, and General Manager of Huizhou Shenzhen Energy Investment Holding Co., Ltd of Shenzhen Energy Co., Ltd; and Chairman of Huizhou Gas Co. Ltd. Mr. Li Yongsheng, Supervisor, Bachelor of York University of Candada. He erve took the post of General Manager of Purchasing Dept. of Hong Kong Kalexpcb Industry International (Group) Co., Ltd. He now acts as Manager of Tengda Property Co., Ltd, Director of Guangdong Ellington Electronics Technology Co., Ltd. Ms. Chen Lihong, Supervisor, Junior College, Accountant, since 1998, she worked in Shenzhen Shennan Petrolum (Group) Co., Ltd. From Feb. 1999, she worked in Shenzhen Guangju Energy Co., Ltd, successively took the posts of Finance Manger, Assistant Manger. 16 Now, she acts the Deputy General Manager of Shenzhen Guangju Energy Co., Ltd. Mr. Zhang Yanmin, Supervisor, University Graduate, he successively worked in Jining Power Plant, Shandong Electric Power Corporation, Yingda International Trust & Investment Co., Ltd and Shandong Luneng Investment Co., Ltd and successively took the posts of Section Chief of Finance Department, Director of Financial Settlement Center, Vice Chief Accountant, Chief Accountant, Deputy General Manager, etc. Now, he acts the Vice Chief Accountant, Chief Accountant, concurrently take the post of Manager of Planning and Financial Department of State Grid Shenzhen Energy Development Group Co., Ltd; and the Section Chief of State Grid Corporation of China Shenzhen Economics Development Liaison Office. Mr. Wang Wei, Employee Supervisor, Junior College, graduated from Shanghai Electric Power Institute, he ever worked in Shanghai Nanshi Power Plant appointed as Operation Head. In May 1991, he was transferred to the Company and once took position of Operation Head and Section Chief of Operation Department, Section Chief of Maintenance Department. From Jan. 2004 till now, he acts the Director General Manager of Shennandian zhongshan Company and concurrently acts Party Secretary of Shennandian zhongshan Company. Mr. Li Chao, the Employee supervisor, Management Master, Senior Accountant, graduated from Shanxi University of Finance and Economics with Department of Finance, later studied in Macau University of Science and Technology with the Department of Business Administration. From July 1994 to Feb. 1996, he worked in Shenzhen Dahua Certified Public Accountants Co., Ltd for auditing; from Feb. 1996 to May 1997, he acted Financial Manager of Compaq Computer Technology (China) Co., Ltd; from May 1997 to Feb. 2001, he acted Financial Manager of Hong Kong Zhonglian Power Finance Co., Ltd; from Feb. 2001, he entered the Company, ever acted Division Chief Assistant of Enterprise Development Department; from May 2005, he acted Division Chief of Enterprise Development Department of the Company. Now, he takes concurrently the postion of director of Zhongshan Zhongfa Power Co., Ltd and Jiangxi Zhongdiantou Xinchang Power Co., Ltd. Mr. Yi Yaoping, Employee Supervisor, University Graduate, Engineer; graduated from Wuhan Huazhong University of Science and Technology with Department of Electrical Engineering. From 1991 to 1998, he took the post of Operation Head of Shenzhen Mawan Poweer Co., Ltd Moonbay Gas Turbine Power Plant; from July 1998, he was transferred to the Company, ever took the positions of Deputy Secretary of Production Management Department, Section Chief of Operation Department, Vice-chief Engineer, etc. Now, he acts Vice-president of labor Union of the Company, Factory Director and Party Secretary of Nanshan Power Plant. Now, he takes concurrently the postion of director of New Power Power Co., Ltd and Jiangxi Zhongdiantou Xinchang Power Co., Ltd. (3) Senior executives Mr. Fu Bo, Director General Manager. For details, please refer to the aforsaid resume of Director. Ms. Lin Qing, Deputy General Manager, Senior Engineer, Master degree, graduated from Electricity Department of Hunan University. From 1985, she worked as a teacher in Changsha Teachers’ College of Water and Electricity. Since 1990, she worked in Engineering Department of Guangdong Daya Bay Nuclear Power Station. Since Dec. 1991, she took the positions of Secretary of General Office and Business Director of General Manager Office of Shenzhen Energy Head Co., Ltd; Office Director of Shenzhen Western Power Co., Ltd; Head of Party and Crowd Department, Chairman of the labor union, 17 Director of General Office, Secretary of Party Branch of General Office, director of the labor union, Member of Party Committee, Assistant General Manager and of Shenzhen Energy Group Co., Ltd.. She took the post of Deputy General Manager of the Company since Oct. 2003. Now she concurrently took the posts of Chairman of the Board of Xindianli Company and Director of Tongling Wanneng Company. Mr. Ji Ming, Deputy General Manager, Engineer, Master Degree of Management, graduated from Changchun Institute of Optics and Fine Mechanics and Fudan University. From 1994 to 1999, he successively took the posts of Manager of Investment Department of Shenzhen Shennan Petroleum (Group) Co., Ltd. From 1999, he acted as Deputy General Manager of Shenzhen Guangju Energy Co., Ltd. and General Manager of Shenzhen Guangju Electronic Investment Co., Ltd. Since Dec. 12, he acts the Deputy General Manager of the Company, now he is the Vice-chairman of Shennandian Zhongshan Company. Ms. Zhang Jie, Deputy General Manager, Master of Psychology of Peking University, SPHR of USA PDP, graduated from Foreign Language Department with major of Britain and American Literature of Zhengzhou University, later she studied in Psychology Department with major of Applied Psychology of Peking University. She ever did translation works in Henan Earthquake Bureau. Since Oct. 1990, she worked in Finance Department and General Office of the Company; since 1993, she took the post of Secretary, General Office Director, Assistant General Manager, Employee Supervisor, etc of the Company; since Dec. 2006, she took the post of Deputy General Manager of the Company. Now, she takes concurrently the Director of Shennandian Zhongshan Company and Dongguan Company. Mr. Zhu Wei, Deputy General Manager, Engineer, graduated from Guangdong Electric Power School. He ever worked in Guangdong Xinfengjiang Power Plant with the positions of Operation Monitor, Head, etc; he ever obtained degree of junior college for further study in Nanjing Electric Power Institue. He successively took the posts of Deputy Head of development, Head of Supplying Dept. and Assistant of General Manager of the Company since 1990; during this period, he got on-job postgraduate, since August 2003, he acted as Deputy General Manager of the Company; now he concurrently acts as Chairman of the New Power Company and Supervisor General of Jiangxi Xinchang Company. . Mr. Wang Rendong, Chief Engineer, graduated from Huazhong University of Science and Technology with the department of Thermal Energy and Power, later he got the Master Degree of Economic Management from Huazhong University of Science and Technology. He ever worked in Planning Department of Power Planning and Designing Institute, National Hydraulic and Electric Engineering of Beijing; in June 1988, he was transferred to Shenzhen Huadian South Hydropower Development Co., Ltd. He successively took the posts of Head of Development Dept., Head of Engineering Dept. and Deputy Chief Engineer, Assistant General Manger and Employee Supervisor of the Company since 1990. Since Dec. 2006, he acted Deputy General Manager of the Company; now he concurrently acts as Director General Manager of Shennandian Engineering Company and Director of Shennandian (Dongguan) Company. Mr. Lu Xiaoping, CFO, Senior Accountant, Master of Zhongnan University of Finance & Economics. He ever worked in Chashi People’s Government of Hengnan County of Hunan Province, Hunan Hengyang Fuel Injection Equipment Co., Ltd and Shenzhen Pengji Industry Development Co., Ltd; from 1995 to 1998, he acted as Deputy Manager of Planning and Finance Department of Shenzhen Zhongshen International Cooperation Co., Ltd. He successively took the posts of Accountant and Director of Auditing Dept of Shenzhen Energy Group Co., Ltd. since Dec. 1998. He took the post of CFO of the Company. Now, he concurretnly acts as the Diretor of Shennandian Zhongshan Company, Director of Xiefu Company and Supervisor of Tongling Wanneng Company from Aug. 18 2003. Ms. Hu Qin, Secretary to the Board, Engineer, Economist, graduated from the Thermal Power Engineering Department of Wuhan University of Hydraulic and Electrical Engineering with the major of Applied Chemistry, later she learned the Master Courses in Finance of Nankai University. Since 1988, she worked as Grade Instructor in Thermal Power Engineering Department of Wuhan University of Hydraulic and Electrical Engineering. Since 1991, she successively worked in the Engineering Department, Operations Department, General Office of the Company. Since 1994, she was appointed as the Representative of Securities Department of the Company. From March 2005, she acts as the Secretary to the Board of Directors of the Company, and concurrently acts as Director of Secretariat of the Board of the Company. Now, she conconrently takes the posts of Director of New Powe Company and Supervisor of Energy Environmental Protection Company. 6. Annual Remuneration According to relevant regulations of Articles of Association of the Company, remuneration of director and supervisor depends on Shareholders’ General Meeting; remuneration of senior executives depends on Board of Director. In the report period, senior executives of the Company all drew their remunerations from the Company. (1) In the report period, independent director of the Company supplementarily drew their allowances for the 2006 annual allowance and part allowance in 2007 from the Company according to relevant rules of Interim Regulations on Management of Special Funds of Board of Director approved by Shareholders’ General Meeting of the Company; with the detailes as follows: independent director Huang Sujian, Zhou Chengxin, Xu Jing’an and Yu Xiufeng drew allowance amounting to RMB 154,666.64 (tax included) each person, independent director Wu Xiaolei drew allowance amounting to RMB 142,761.88(tax included); the Company took the relevant fees such as traffic cost, boarding cost, researching cost and studying cost occurred due to work. Director General Manager Fu Bo, Employee Supervisor Wang Wei, Li Chao and Yi Yaoping drew their remunerations from the Company. Except them, members of the Board including Wei Wende, Wang Jianbin, Sun Yulin, Li Li, Yu Chunling, Zhong Chengli, He Yingyi, Huang Fuhan, Huang Shaoji, as well as members of Supervisory Committee including Zhu Tianfa, Zhou Qun, Li Yongsheng, Chen Lihong and Zhang Yanmin all drew the remunerations from the shareholder companies. The Company took the relevant fees such as traffic cost, boarding cost, researching cost and studying cost occurred due to the obligation performances by directors, supervisors. In the report period, the total remuneration before tax of director, supervisor and senior executives was RMB 6,906,600. (2) The Company has established fairly complete remuneration system and reward measures. The Board of Directors and Remuneration and Appraisal Committee worked out withdrawal of the 2006 annual remuneration and plan for assessment and reward for production operation target at the beginning of the year and submitted them to the Board of Director of the Company for examination, approval and implementation. The pay received by senior executives of the Company is composed of fixed and basic salary as well as evaluation and reward salary. Total annual remuneration of General Manager is confirmed by Board of Directors, and the distribution plan for payments of other senior executives and employees is put forth by General Manager authorized by Board of Director for concrete implementation. The basic salaries of senior executives is paid monthly; the reward salaries were determined according to not only the annual evaluation targets and reward plan made by the Board at the beginning of the year, but also the real condition of the Company as well as personal evaluation. 19 7. There were no directors, supervisors and senior executives leaving his/her posts or engaging in the report period, (II) Employees By the end of Dec. 31, 2007, the Company had totally 374 employees registered in the book (excluding shareholding subsidiaries), little decrease compared with that of the year 2006. Of them, 114 persons are personnel engaged in equipment operation, 62 are personnel engaged in equipment overhauling, 18 are personnel engaged in material supply, 22 are financial personnel and 51 are administrative and managerial personnel; education degree: 108 persons hold college degree, 97 hold bachelor degree and 32 hold masters degree. As the Company has implemented Shenzhen Social Insurance System, the Company did not have to pay any expenses to the retired staff. V. Administrative Structure (I) Company Administration 1. Basic information In the report period, strictly according to Company Law, Security Law, Administration Standard of Listed Companies and other standard documents on listed company administration issued by CSRC, the Company constantly perfected and consummated administrative structure of legal persons to standardize the operation of the Company. The actual situation of administrative structure of the Company legal persons basically accorded with the requirements of relevant documents. 2. Performance of the special activities of administration in the report period In the report period, according to the unified deployment of special activities of listed company administration by CSRC, Shenzhen Security Regulatory Office and Shenzhen Stock Exchange, the Company started the special activities timely and established leading group of special activities of the Company administration with chairman of Directors as the group leader. The Company announced Self-Inspection Report and Reform Report of Special Activities of the Company Administration on Jul.25, 2007, made self-inspection of the Company administration and received public appraisements, and reformed the problems found in self-inspection and appraisement. Shenzhen Security Regulatory Office made self-acceptance of special activities of administration and offered Supervisory and Management Opinions of special activities of administration in Shenzhen Nanshan Power Co. Ltd., which affirmed the performance of special activities, and expressed reform opinions. The Company paid high attention to that and seriously reformed according to relevant requirements, and announced Reform Report of Special Activities of Administration on Oct. 27, 2007. The Company newly formulated and perfected Internal Control System, Management Standard of Shares Held by Directors, Supervisors and Senior Management and Their Changes, Internal System of Investment in Stock Market, Management System of Information Disclosure, System of Reception and Extension Work and Internal Report System of Significant Information. The special activities included three periods of self-inspection, public appraisement, reform and improvement, completing the fixed goal and task of special activities of administration. The Company summed the reform performance of special activities as follows: (1) Problems found in self-inspection and reform information i) Internal control system needed further perfected Reform measures: newly formulated and perfected Internal Control System, Management Standard of Shares Held by Directors, Supervisors and Senior Management and Their 20 Changes, Internal System of Investment in Stock Market, Management System of Information Disclosure, System of Reception and Extension Work and Internal Report System of Significant Information; set audit overseers in Board Secretariat; adjusted members in audit committee of Board of directors. ii) Routine operation and management needed further advanced and improved Reform measures: formulated and perfected relevant operation and management system, increased strength to implement systems and strictly fulfilled audit procedures. (2) Problems found in field inspection by Shenzhen Security Regulatory and reform information i) Performance of reporting unopened information to majority shareholders and reform information Reform measures: the majority shareholder Energy Group signed Commitment Letter of Intensifying Unopened Information Management, and the Company offered literary commitment of disclosing nonstandard administration and reporting unopened information insiders’ list. The Company disclosed actually the said issues in Administrative Structure in periodic report according to the requirements of supervisory and management. ii) Problems of nonstandard operation and authorization of three meetings Reform measures: from the second temporary shareholders’ meeting in 2007, the Company made definition of the authority range and vote authority of letter of attorney of three meetings, perfected and improved operation details of three meetings. (Detailed information was in Self-inspection Report and Reform Report of Special Activities of the Company Administration on Jul.25, 2007.) (3) The notice requirements of reform in fixed time proposed by Shenzhen Security Regulatory Office and reform information In respect of special inspection of relevant issues of the Company from 2002 to 2005, Shenzhen Security Regulatory Office issued Notice Concerning Ordering Shenzhen Nanshan Power Co. Ltd. to Reform in Fixed Time on Sep.12, 2007(SZJGSZ[2007] No.25), which required the Company to reform Completely to the following items: i) Some transaction affairs were not fair Reform measures: established and perfected internal control system and increased strength to implement systems, fulfilled audit procedures strictly and literarily criticized main persons in charge of relevant affairs. ii) Problem of disobeying information disclosure system Reform measures: The Company made complementary announcement on disobeying information disclosure system. iii) Problem of nonstandard usage and management of special funds of Board of Directors Reform measures: the Company engaged Certified Public Accountants Co. Ltd. to make special audit to the usage of special funds of Board of Directors and offered special inspection report. The Company also newly formulated Method of Funds Management of Board of Directors. (Detailed information was in Reform Report of Special Activities of the Company Administration on Oct.27, 2007.) 3. Nonstandard administration of the Company in the report period In the report period, according to the requirements of Notice Concerning Strengthening Supervisory and Management of Providing Unopened Information to Majority Shareholders and Actual Controllers in Listed Companies, Complementary Notice Concerning Strengthening Supervisory and Management of Providing Unopened Information to Majority Shareholders and Actual Controllers in Listed Companies, the Company offered literary commitment of disclosing nonstandard administration and reporting unopened 21 information insiders’ list, and at the same time, the majority shareholder Power Group Co. Ltd. signed Commitment Letter of Intensifying Unopened Information Management to promote the Company and relevant obligors to strictly control insiders’ range in the process of delivering information and guarantee the reasonable usage of unopened information. Particulars about delivering unopened information to Shenzhen Energy Group Co. Ltd.: (1) Daily generation of the Company was directly delivered to Shenzhen Energy Group Co. Ltd. by production technology department of the Company; (2) According to the regulations of Notice Concerning Regulating the Work Report of Enterprise Supervisor issued by Shenzhen Energy Group Co. Ltd. SN [2006] No.28, reported and delivered Report of Supervisor’s Significant Issues on 15th day each month, which included investment of the Company, disposal of assets, guarantee status, and relevant information of funds changes, bidding, lawsuit, personnel appointment and removal, and financial data. The report was put in to Supervisor by Board Secretariat after checked by persons in charge of relevant functional department and signed by General Manager; (3) Reported and delivered monthly production and monthly security report of the Company on 15th day each month, and reported to production operation department of Shenzhen Energy Group Co. Ltd. after approving by person in change of production technology department and charge leaders of the Company. (4) According to Notice Concerning Regulating Decision-Making of Priority Right Representatives of Group issued by Shenzhen Energy Group Co. Ltd. SN [2006] No.36, reported and delivered meeting documents to Shenzhen Energy Group before holding Board of Directors’ meeting, and put in to Chairman of Board after revising by Board Secretariat in accord with the discussion opinions of operation group. In the report period, the Company held 7 Board of Directors’ meetings totally. Unopened information reported to Shenzhen Energy Group Co. Ltd. by the Company did not influence the independence of the Company. Particulars about information reporting and insiders list had all reported to Shenzhen Stock Security Regulatory Office, and reported Particulars about Offering Unopened Information to Majority Shareholders and Actual Controllers to Shenzhen Stock Security Regulatory Office before the 10th day each month. (II) Performance of Independent Directors None of the Company’s independent directors proposed the objection on proposals examined by all meetings of the Board held in 2006 and other matters. Independent directors carefully checked significant related transaction and other significant events which independent directors need to express their opinions on, and issued written opinion letter of independent director. Particulars about independent directors’ presenting the Board Meeting in the report period: Name of Times are Presence in Entrusted Absence independent supposed to person presence Remarks (Time) directors be attendance (Time) (Time) Huang Sujian 7 4 3 0 Zhou Chengxin 7 6 1 0 Xu Jing’an 7 7 0 0 Yu Xiufeng 7 7 0 0 Wu Xiaolei 7 7 0 0 (III) The actual first largest shareholder of the Company exerted the investor’s rights according to the laws through the shareholders’ general meeting. The Company is separated from the actual first largest shareholder in terms of Business, Assets, Personnel, 22 Organization and Finance; the Company possessed the whole business and independent operating capability. 1. Business: The business of the Company is completely independent from the actual first largest shareholder. Although the actual first largest shareholder and its subsidiaries operate in the same or similar business, the Company is totally separated in the management and operation of business. 2. Assets: The Company’s assets are independent and complete with clear ownership. In the report period, the actual first largest shareholder neither occupies nor dominates the assets of the Company, nor interferes the asset management of the Company. 3. Personnel: The Company is absolutely independent from the actual first largest shareholder. The Executives, Chief Financial Officer and the Secretary of Board of Director don’t take any position in the unit of actual first largest shareholder. 4. Organization: The Board of Directors, the Supervisory Committee and other intra-company departments operate independently. There exists no subordinate relations between the Company/its various functional departments and the actual first largest shareholder /its functional departments; the first largest shareholder /its functional departments neither gives any orders or plans about the operation, nor interferes the independence of the Company/its various functional departments in any form. 5. Finance: According to the relevant requirements of laws and rules, the Company establishes sound financial management system and accounting management system, and accounts independently. The actual first largest shareholder isn’t involved in the financial and accounting activities of the Company. (IV)Particulars about establishing and perfecting internal control system of the Company In the report period, according to the relevant regulations of Notice on Issues Concerning Campaign to Strengthen Governance of Listed Companies issued by CSRS ZJGSZ [2007] No.28 and Guidance To Listed Company Internal Control promulgated by Shenzhen Stock Exchange, the Company combined self-inspection and reform of special activities of listed company administration, with perfecting internal control system as key point, completely fulfilled establishing, perfecting, implementing and efficiently supervising internal control system of the Company. 1. Particulars about internal control of holding subsidiaries According to the regulations of internal control system, business policies and risk management policies, the Company supervised holding subsidiaries to establish relevant business plan, risk management procedure, made definitions of empanel measures and limits of authority of directors, supervisors and important senior managers, and required holding subsidiaries to establish significant events report system and discussion procedure, to received and analyzed monthly and quarter report of the subsidiaries in order to manage the holding subsidiaries. According to the relevant regulations of Guidance To Listed Company Internal Control promulgated by Shenzhen Stock Exchange, the Company internally controlled holding subsidiaries strictly, sufficiently and efficiently. In the report period, there was no situation of disobeying Internal Control System of the Company. Attachment: Diagram for Control Structure and Proportion of Shares Held for Controlling Subsidiary 23 50% Shennandian (Zhongshan) Electric Power Co., Ltd. 55% 25% Shenzhen Nanshan Power Co., Ltd. Shenzhen Shennandian Gas Engines Engineering Technology Co., Ltd. 40% 60% Zhongshan Zhongfa Power Co., Ltd. 100% 75% Shennan Energy(Singapore) Pte Ltd. Zhongshan Power Plant Co., Ltd. 75% Shenzhen New Power Industrial Co., Ltd. 25% 75% HongKong Syndisome Co., Ltd. 100% 2. Internal control of connected transaction The Company specified regulated the principles of connected transaction, connected person and connected relation, decision-making procedure of connected transaction and disclosure of connected transaction in Internal Control System. The connected transaction of the Company strictly accord with the relevant implementation regulations of Internal Control System. The Company internally controlled connected transaction strictly, sufficiently and efficiently in accordance with the relevant regulations of Guidance To Listed Company Internal Control promulgated by Shenzhen Stock Exchange. In the report period, there was no situation of disobeying Internal Control System of the Company. 3. Internal control of external guarantee The Company strictly controlled external guarantee in accordance with the principles of legality, prudence, mutual benefit and security, and definitely regulated approval principles of external guarantee and external disclosure in Internal Control System. In the report period, there was no situation of guarantying for companies not holding shares. The Company internally controlled external guarantee strictly, sufficiently and efficiently in accordance with the relevant regulations of Guidance To Listed Company Internal Control promulgated by Shenzhen Stock Exchange. In the report period, there was no situation of disobeying Internal Control System of the Company. 4. Internal control of collected funds The Company formulated Management Measures of Collected Funds, which regulated the store, usage and supervisory of collected funds in accordance with requirements of CSRC. In the report period, there were no new collected funds or collected funds in the past continuing to the report period. According to the relevant regulations of Guidance To Listed Company Internal Control promulgated by Shenzhen Stock Exchange, Management Measures of Collected Funds formulated by the Company internally controlled collected funds strictly, sufficiently and efficiently. 5. Internal control of significant investment The Company constantly followed the principles of legality, prudence, security and efficiency, controlled risk of investment and paid high attention to investment benefits. In The Articles of the Association and Internal Control System, the Company definitely regulated limits of authority of Board of Directors and shareholders’ general meeting in making decisions of significant investment, and formulated strict checking procedures. According to Guidance To Listed Company Internal Control promulgated by Shenzhen Stock Exchange, the Company internally controlled significant investment strictly, sufficiently and efficiently. In the report period, there was no situation of disobeying The Articles of Associations and Internal Control System of the Company. 6. Internal control of information disclosure The Company formulated Management System of Information Disclosure, System of Reception and Extension Work and Internal Report System of Significant Information, which efficiently controlled opened information disclosure and internal communication of significant events in the whole process. The Company made definitions of the range and inside of significant information, and formulated relevant control system of information communication of departments such as contents, methods and time limit. The Company implemented information disclosure responsibility system, which made information disclosure responsibility onto each person to ensure the person in charge of information disclosure to learn all kinds of information of the Company and disclose information timely, exactly and completely. According to Guidance to Listed Company Internal Control promulgated by Shenzhen Stock Exchange, the Company internally controlled information disclosure strictly, sufficiently and efficiently. In the report period, there was no situation of disobeying Guidance To Listed Company Internal Control, Management System of Information Disclosure, System of Reception and Extension Work and Internal Report System of Significant Information. 7. Self-evaluation of internal control Board of Directors of the Company thought, internal control activities and all kinds of internal control systems established and perfected accorded with the relevant state laws, administrative rules, requirements of supervisory departments and the actual situation of the Company, and guaranteed normal operation of the Company business management. With the further development of business and changes of outside environment, the internal control of the Company needed constantly intensify and perfect. 8. Opinions on self-evaluation of internal control expressed by Supervisory Committee: Supervisory Committee thought, self-evaluation of internal control was complete, true and exact, and reflected the actual situation of internal control of the Company. 9. Opinions on self-evaluation of internal control expressed by Independent Directors: In the report period, Board of Directors revised, discussed and passed a set of management systems including Internal Control System. Internal Control System of the Company was perfect and consummated, which accorded with relevant state laws, administrative rules and requirements of supervisory departments. Important activities of internal control proceed according to the regulations of all kinds of systems of internal control. The Company internally controlled subsidiaries, connected transaction, external guarantee, significant investment and information disclosure strictly, sufficiently and efficiently, guaranteed normal operation of business management, with rationality, completion and efficiency. Self- evaluation of internal control of the Company accorded with the actual situation of internal control. (V) The Achievements Evaluation and Encouragement Mechanism of Senior Executives of the Company In the report period, the Company still adopted the achievements evaluation and encouragement mechanism for senior executives based on the operation performances and production safety. VI. Brief of the Shareholders’ General Meeting In the report period, the Company held the first Extraordinary Shareholders’ General Meeting 2007, Shareholders’ General Meeting 2006, the first Extraordinary Shareholders’ General Meeting 2007, the second Extraordinary Shareholders’ General Meeting 2007, the third Extraordinary Shareholders’ General Meeting 2007, and the fourth Extraordinary Shareholders’ General Meeting 2007. The meetings were summarized as follows: (I) The first Extraordinary Shareholders’ General Meeting 2007 On Jan.22, 2007, the Company held the first Extraordinary Shareholders’ General Meeting 2007 and the resolutions of the meeting had been published on designated newspapers by the Company dated Jan.23 of the same year. as well as on website designated by CSRC. (II) Shareholders’ General Meeting 2006 On Apr.11, 2007, the Company held Shareholders’ General Meeting 2006 and the resolutions of the meeting had been published on designated newspapers by the Company dated Apr.12 of the same year. as well as on website designated by CSRC. (III)The second Extraordinary Shareholders’ General Meeting 2007 On Oct.15, 2007, the Company held The second Extraordinary Shareholders’ General Meeting 2007 and the resolutions of the meeting had been published on designated newspapers by the Company dated Oct.16 of the same year. as well as on website 26 designated by CSRC. (IV) The third Extraordinary Shareholders’ General Meeting 2007 On Nov.12, 2007, the Company held The third Extraordinary Shareholders’ General Meeting 2007 and the resolutions of the meeting had been published on designated newspapers by the Company dated Nov.13 of the same year. as well as on website designated by CSRC. (V) The fourth Extraordinary Shareholders’ General Meeting 2007 On Dec.31, 2007, the Company held The forth Extraordinary Shareholders’ General Meeting 2007 and the resolutions of the meeting had been published on designated newspapers by the Company dated Dec.31 of the same year. as well as on website designated by CSRC. VII. Report of the Board of Directors (I) Review of the Company’s operation status in the report period 1. Scope of the main business and its operation Scope of the Company’s business covers providing electricity and heat for production and operation, and relevant technic consult and service for power plant (station). It mainly takes gas-steam combined-cycle power plants and coal-fired power unit for power generation. At present, the generator set of the Company, including the ones which are operated now and those which are in construction; mainly locate in Shenzhen, Zhongshan, and Dongguan which are the center areas for electricity burthen in Pearl River Delta, and Nanchang in Jiangxi province. In 2007, with enhance of the State’s macro-control policy, the economy in these areas still present rapid growth. According to the relevant statistics, the total output of power generation of the whole Guangdong Province in 2007 was 317.4 billon kwh with an increase of 13.64% over the same period of last year, among which 264.3 billion kwh has been finished by tracking electricity with an increase of 20% over the same period of last year, and the non-tracking thermal power reaches at 37.2 billion kwh with a decrease of 8.67% over the same period of last year. The total power used by the society of the whole province reaches at 328.4 billiob kwh with an increase of 13.7% over the same period of last year and 1.8% over the year of 2006. In 2007, the total electricity supply for Shenzhen is 54.229 billion kwh with an increase of 13.95% over the same period of last year, among which 43.539 billion kwh has been finished by tracking electricity with an increase of 18.99% over the same period of last year, and the non-tracking thermal power (local power plant) reaches at 10.69 billion kwh with a decrease of 2.81% over the same period of last year. In the repot period, sticking to the two centers Profit and Development assured by the board of directors, the Company puts emphasis on economical operation and safe production and further digs the present potential. At one side, through developing the cycle economy, the Company manages to realize the type-switch for the inventory asste from the original simple peak-shaving power generation to multi-stage energy utilizing integrated supplier. At the other side, the Company actively conducts adjustment in industry structure and seeks for the opportunity to invest in great-typed coal and electricity enterprise and relevant industries, to help the Company realize long-term sustainable development. In 2007, the Company successfully accomplishes all the targets concerning the production, operation and management delivered by the Board. It is awarded as the the 1st Round Top Ten Enterprises Developing Cycle Economy in Shenzhen and Unit with Multi-stage Energy Cycle Utilizing. Meanwhile, the Company is also one of the experimental units of the 2nd round units with cycle economy confirmed by the State Development and Reform Commission and other 5 commissions. That is also to say, the Company has become one 27 of the two experimental units of the electricity industry in the state. Due to the unexpected rise in fee price in international market and the supply shortage of natural gas, with the spirit of economical operation, the Company dynamically adjusts the annual power generation plan according to the changes in fee price, supply and demand of electricity network and standard of allowance for power generation and other external situation. During the report period, the integrated power accumulatively generated amounts to 5.33 billion kwh, with a decrease of 5.66% over the same period of last year, including, 3.336 billion kwh (including 1.05 billion kwh generated by nutural gas) were generated by Nanshan Power Factory, with an increase of 5.00% over the last year, among which 3.2186 billion kwh is for electricity to access grid, taking 30.6% of the total electricity to access grid-10.5 billion kwh generated by the local power plants of Shenzhen. 1.051 billion kwh were generated by Zhongshan Company of Shenzhen Nanshan Power Co., Ltd, with an increase of 3.24% over the same period of last year, 0.943 billion kwh were generated by Dongguan Company of Shenzhen Nanshan Power Co., Ltd, with a decrease of 17.93% over the same period of last year. The total heat provided by the project of heat-and-electricity combined supply of New Power Company for external reaches at 217,570,000 tons.in the whole year. On Dec 31st of 2007, because Zhongshan Power Plant and Zhongfa Power Company have been consolidated into the statements of the Company, the consolidated assets of the Company amounts to RMB 5,552,914,000 with an increase of 16.37% over the year-begin; the shareholders’equity of the Company amounts to RMB 1,866,210,000, among which RMB 1,725,019,000 goes to the shareholders’equity attributable to parent company with an increase of 8.71% over the same period of last year. In 2007, the Company realized the operation income of RMB 3,620,124,000 with a decrease of 6.57% over the last year; realized the total profit of RMB 94,963,000 with an increase of 74.85% over the last year; the net profit attributable to parent company amounts to RMB 118,086,000 with an increase of 87.04% over the last year. The earnings per share reaches at RMB 0.22, with an increase of 87.04% over the last year. 2. Particulars about composing of operations income and operations profit in the report period Unit: RMB’0000 Classified according to industries or Operations income Operations income Gross profit ratio (%) products Production of electric 333,552.20 352,702.70 -5.74 power Production of heating 5,616.10 5,394.80 3.94 power Contract for project 2,497.60 1,193.50 52.21 Others 20,346.49 19,517.88 4.07 Unit: RMB’0000 Classified according Operations income Operations income Gross profit ratio (%) to area Shenzhen 226,090.30 249,863.20 -10.51 Zhongshan 71,708.95 68,005.83 5.16 Dongguan 64,213.15 60,939.85 5.10 Note: reasons accounting for change: Operations income from production of electric power decreased 2.62% over the same period of last year, gross profit ratio increased 0.32 percentage point over the same period of last year, which were mainly resulted from the 28 decrease in power generattion and the comparative increase of the price for electricity to access grid resulted from the High Electricity Utilization and High Power Price policy implemented by Shennandian (Dongguan) Company and Shennandian (Zhongshan) Company. 3. Main suppliers and customers The core business of the Company is the production of electric power. The main raw materials for generating plant are fuel oil, natural gas and spare parts of the equipment service, etc. In 2007, the purchasing amount from the top five suppliers amounted to RMB 3,490,758,000 taking 97% of annual purchasing amount. The total amount in sales of electric power in Shenzhen of the Company amounted to RMB 1,980,679,200, 100% sold to Shenzhen Power Supply Bureau of Guangdong Power Grid Corporation; the total amount in sales of electric power in Zhongshan of the Company amounted to RMB 712,711,400, 100% sold to Guangdong Power Grid Corporation; the total amount in sales of electric power in Dongguan of the Company amounted to RMB 642,131,500, 100% sold to Guangdong Power Grid Corporation. 4. The financial status of the Company Unit: RMB’0000 Dec 31st of 2007 Dec 31st of 2006 Percentage point increased Proportion Proportion of the Items Amount taking in the Amount taking in the proportion total assets% total assets% taking in the total assets Total assets 555,291.40 100.00 477,175.80 100.00 Monetary assets 41,917.20 7.55 62,351.40 13.07 -5.52 Accounts 61,934.40 11.15 58,688.40 12.30 -1.15 receivable Accounts paid in 3,434.20 0.62 4,361.80 0.91 -0.29 advance Other accounts 3,372.40 0.61 8,140.10 1.71 -1.10 receivable Inventory 36,797.20 6.63 37,964.30 7.96 -1.33 Long-term equity 11,308.50 2.04 7,188.50 1.51 0.53 investment Fixed assets 285,599.60 51.43 282,687.90 59.24 -7.81 Construction in 2,116.30 0.38 5,216.50 1.09 -0.71 process Intangible assets 106,735.30 19.22 9,011.80 1.89 17.33 Short-term loans 248,473.50 44.75 182,267.00 38.20 6.55 Bills payable 25,409.00 4.58 42,854.30 8.98 -4.40 Accounts payable 16,509.10 2.97 4,964.80 1.04 1.93 Tax payable -17,659.20 -3.18 -9,609.70 -2.01 -1.17 Other accounts 56,324.80 10.14 7,213.60 1.51 8.63 payable Long-term loans 17,600.00 3.17 33,020.30 6.92 -3.75 Note: main reasons accounting for the changes over the same time of last year: 1) Monetary assets decreased over the year-begin, mainly due to that Shennandian Head Office received the subsidy for power generation at the end of 2006 and also received 29 electricity fee income for November, while this dose not happen for this year; 2) Accounts receivable increased over the year-begin, mainly due to the increase of electricity fee receivable; 3) Accounts paid in advance decreased over the year-begin, mainly due to that payment for goods paid to suppliers in advance decreased; 4) Other accounts receivable decreased over the year-begin, mainly due to that accounts receivable was offset after consolidating the statements of Zhongshan Power Plant Co., Ltd and Zhongshan Zhongfa Power Co., Ltd; 5) Inventory decreased over the year-begin, mainly due to the decrease in inventory of fuel; 6) Long-term equity investment increased over the year-begin, mainly due to increasing investment in Jiangxi Zhongdiantou Xinchang Power Generation Co., Ltd; 7) Fixed assets increased over the year-begin, mainly due to switching the construction in process which is in state of being used to fixed assets; which correspondingly resulted a decrease in construction in process over the year-begin; 8) Intangible assets increased over the year-begin, mainly due to increasing land use right for Zhongshan Power Plant Co., Ltd and Zhongshan Zhongfa Power Co., Ltd; 9) Short-term loans increased over the year-begin, mainly due to that Shennandian Head Office paid in advance for Zhongshan Zhongfa Power Co., Ltd and replaced part banks to accept draft, which resulted an increase in short-term loans; 10) Bills payable decreased over the year-begin, mainly due to Shennandian Head Office took the short-term loans to replace part bank acceptance in order to keep the flexibility of financing, which led an obvious decrease in bank acceptance; 11) Accounts payable increased over the year-begin, mainly due to the increase in accounts payable to suppliers at the year-end; 12) The balance for tax payable in this year is negative, mainly due to that the lasting rising in cost of raw material for this year led a serious converse between electricity price and cost, which made the purchase tax more than the sales tax in VAT payable; 13)Other accounts payable increased over the year-begin, mainly due to increasing accounts payable because of the accounting statements of Zhongshan Power Plant Co., Ltd and Zhongshan Zhongfa Power Co., Ltd; 14) Long-term loans decreased over the year-begin, mainly due to that part long-term loans has been returned back in this year. (2) In the report period, particulars about the changes in the Company are operating expense, administrative expense, financial expense and income tax. Unit: RMB’0000 Items 2007 2006 Increase/decrease (%) Operating expense 216.50 465.80 -53.52 Administrative 10,341.00 8,814.60 17.32 expense Financial expense 12,698.10 11,965.60 6.12 Investment income - 220.60 -100.00 Non-operating income 50,933.90 45,000.80 13.18 Non-operating 312.10 31.90 878.37 expenditure Income tax -258.30 -298.00 13.32 Note: main reasons accounting for the changes over the last year: 1) Operating expense decreased over the last year, mainly due to the decrease in expense for engaging agency organization and labor cost; 30 2) Administrative expense increased over the last year, mainly due to consolidating the administrative expense of Zhongshan Power Plant Co., Ltd and Zhongshan Zhongfa Power Co., Ltd; 3) Financial expense increased over the last year, mainly due to consolidating the financial expense of Zhongshan Power Plant Co., Ltd and Zhongshan Zhongfa Power Co., Ltd; 4) No investment income occurred this year, and the occurred amount for last year was obtained from long-term equity investment; 5) Non-operating income increased over the last year, mainly due to obtaining consolidated income from purchasing; 6) Non-operating expenditure increased over the last year, mainly due to increasing losses from assets disposal of Zhongshan Zhongfa Power Co., Ltd; 7) Income tax increased over the last year, mainly due to the increase in the income tax expense which should be recorded. (3) Change in the financial data of cash flow of the Company during the report period Unit: RMB’0000 2007 2006 Percentage point increased or Items Structure Structure Amount Amount decreased in comparison% comparison% structure comparison Cash in flow from 455,333.70 461,956.50 operating activities Including: Cash from selling commodities or 419,105.00 92.04 411,873.00 89.16 2.88 offering labor Cash out flow from 435,066.70 475,075.90 operating activities Including: Cash paid for 400,800.70 92.12 452,879.40 95.33 -3.21 commodities or labor Net cash flows arising 20,267.00 -13,119.40 from operating activities Net cash flows arising -15,201.50 -11,566.20 from investing activities Net cash flows arising -38,967.70 56,331.20 from financing activities Note: main reasons accounting for the changes over the last year: 1) Net cash flows arising from operating activities increased over the last year, mainly due to the increase in accounting payable for operation; 2) Net cash flows arising from investing activities decreased over the last year, mainly due to the increase in capital expenditure; 3) Net cash flows arising from financing activities decreased over the last year, mainly due to bank loans has been returned. 5. Operations and achievements of main controlling companies and participating companies 1) New Power Company: The main business scopes are technological development and power generation of afterheat utilization with its registration capital of RMB 113,850,000, of which the Company hold 100% shares. Ended as December 31, 2007, the total assets of the company amounted to RMB 955,635,800 with an increase of 8.19% over the year-begin; the net assets amounted to RMB 288,041,000 with a decrease of 23.87% over the year-begin. In 2007, the income from main operation the company realized amounted to RMB 83,902.75 ten thousand with an increase of 7.43% over the last year; the net 31 profits amounted to RMB 9,348.79 ten thousand with an increase of 226.35% over the last year, which was mainly due to that the international oil price fell down in the 1st and 2nd quarter, the electricity demand of Shenzhen created a new height in history ever and the set successive power generation made profit. 2) Shennandian (Zhongshan) Company: The main business scopes are power generation of combustion engine and afterheat, power supply and heating supply (excluded the heating pipe networks) with its registration capital of RMB 39,680 ten thousand, of which the Company hold 80% shares. Ended as December 31, 2007, the total assets of the company amounted to RMB 132,033.66 ten thousand with a decrease of 6.30% over the year-begin; the net assets amounted to RMB 8,082.42 ten thousand with a decrease of 32.79% over the year-begin. In 2007, the income from main operation the company realized amounted to RMB 71,423.75 ten thousand with an increase of 13.96% over the last year; the losses amounted to RMB 3,822.48 ten thousand with a decrease of 51.12% over the last year, which was mainly due to that the international oil price still keeps high and the present price of the Company for electricity to access grid and the standard for subsidy is comparatively low. 3) Shennandian (Dongguan) Company: The main business scopes are power generation of combustion engine and afterheat, power supply etc. In October, 2007, the overseas exclusively-owned subsidiary of the Company-Xingdesheng Company purchased 15% equity of Shennandian (Dongguan) Company from Hong Kong Xinyuan Co., Ltd. The total shares-holding proportion reaches at 70%. Ended as December 31, 2007, the total assets of the company amounted to RMB 106,279.90 ten thousand; the net assets amounted to RMB 25,052.72 ten thousand. In 2007, the income from main operation the company realized amounted to RMB 64,213.15 ten thousand; the losses amounted to RMB 2,668.03 ten thousand, which was mainly due to the stop working conducted by the company in order to cooperate with the State Environmental Protection Administration on the work of environment evaluation, and also due to that the electricity generated fell down over the last year. 4) Shennandian Engineering Company: The main business scopes are technological advisory service on construction project of gas-steam combined cycle power plant (station), accepting the maintenance and repair on the running equipment of gas-steam combined cycle power plant (station) with its registration capital of RMB 10 million. In the report period, the overseas exclusively-owned subsidiary of the Company-Xingdesheng Company purchased 40% equity of Shennandian Engineering Company from Nangang Power Co., Ltd (Hong Kong). Now, Shennandian Engineering Company turns to be an exclusively-owned subsidiary of the Company. Ended as December 31, 2007, the total assets of the company amounted to RMB 11,385.32 ten thousand with a decrease of 17.21% over the year-begin; the net assets amounted to RMB 9,484.93 ten thousand with an increase of 11.01% over the year-begin. In 2007, the income from main operation the company realized amounted to RMB 2,505.98 ten thousand with a decrease of 22.39% over the last year; the net profit amounted to RMB 941.36 ten thousand with a decrease of 53.13% over the last year, which was mainly due to that the projects carried has gone into operation with a large expenditure in previous expense. 5) Xiefu Company: The main business scopes are the purchase and sales of the diesel oil, the heavy oil, the lubricating oil with its registration capital of RMB 53.3 million, of which the Company holds 50% shares. Ended as December 31, 2007, the total assets of the company amounted to RMB 53,820.50 ten thousand with an increase of 61.79% over the year-begin; the net assets amounted to RMB 5,866.04 ten thousand with an increase of 21.38% over the year-begin. In 2007, the income from main operation the company realized amounted to RMB 190,514.00 ten thousand with a decrease of 23.21% over the last year; the net profit amounted to RMB 875.44 ten thousand with an increase of 33.15% 32 over the last year. (II) Prospect for the Operation of 2008 According to the prediction made by relevant organization, economy in Guangdong province will continuously grow rapidly and steadily in 2008, with the abiding climbing up for electricity demand. The increase rate of electricity-using for the whole society will reach above 13%. The newly-increased electricity-supply capacity is lower than the newly-increased electricity demand. It is confirmed that the situation of electricity-shortage of whole-year, whole-network and power supply will appear in the whole province. It is predicted that the electricity-supply provided by Shenzhen Power Grid in 2008 will increase exceeding 13% over the same period of last year. Due to that the local power plants of Shenzhen have no new sets to be put into production in the whole year; the actual electricity supplied by the local power plants of Shenzhen in 2008 will almost be the same to that of 2007. In 2008, the Company is facing a more complicated operating environment. At one side, the price of fuels used for power generation always make new height, the attemper policy promulgated by the nation for saving energy is promoting gradually, power in macro-control is enhancing abidingly; at the other side, because of the paralysis covering a great area of the network project Western Electricity Sent to the East and shortage of the newly-increased power resources, the electricity supplied by Guangdong province is n serious shortage. For that, the provincial government has released the financial and electricity price subsidy measurements to encourage the peaking power generation by 9E set for the whole year, creating an useful market environment for the subsidiary power plants to generate power actively and efficiently. Facing the operating condition of challenge and opportunity co-existing, continuously adhering to the basis of the two centers Efficiency and Development, the Company further implements the management theme of Execution Year, takes hands in the practice of the various execution in every work, advances the internal management level, carries out various work with creative thought, taking the second creating spirit as motivation and Target, Index, Quality and Responsibility as means, strive to realize the strategic aim switching to the district enterprise with comprehensively-used-and-supplied energy and establish the road for sustainable development with the Shennandian’s characteristics. The essential points in the work of this year: 1. On the basis of doing well the management over safety production, and maintenance and operation of equipments, try the best to generate more electricity, ensuring the safe and economical operation of the production of power. 2. Takes close eyes to the practice of the subsidy policy, continuously strengthens contact and negotiation with the department of government taking charge in this field, ensuring that the subsidy capital could be received timely and sufficiently; actively reflects change in cost of fuel and difficulties of the gas-turbine enterprises to the government. With the abiding rise in fuel price, that is done with the hope of promoting the government to release the relevant policy for power generation by gas-turbine power plant. 3. According to the relevant request for the cycle economic experimental units released by the State Development and Reform Commission, does well in the programming for general cycle economy of the Company and the formation and sending-for-examination work for the related execution scheme; tries best to promote the execution of projects of automobile heat supply, drying dirt earth, cold and hot electricity, oil-to-gas and mid-water exploitation. 4. Actively broaden channels for financing, improve the financial structure of the Company, ensure the safety of assets and cut down the financial expense. 5. On the basis of offering sufficient fuel for power generation, carry out hedge for 33 purchasing fuel oil, rationally control and cut down cost of fuel; enlarge scale of natural gas purchasing, and ensure that Dongguan Gaobu Plant successfully take LNG as fuel for power generation in the later half year; well finish the purchase of spare parts for production and the annual repair. 6. Accomplish the oil-to-gas project of Shennandian Zhongshan, Shennandian Dongguan Company, win approval for the projects of Zhongshan and Dongguan Plants within the year by means of combined-production with heat and electricity. And meanwhile, actively promote the economic programming for the industry in the towns where the plants locate. Seek for sustainable development for the enterprises by implementing the projects of cycle economy. 7. Plan out the develop aims and strategic program in recent, middle and long term for the Company; do well the capital register by stage and project construction for Jiangxi Xinchang Plant; continuously explore excellent projects and guarantee that the Company has the wanted project reserve for development. 8. According to the request of shareholders and supervisory department, with the general deploy delivered by the Board, the Company establish the stock option incentive mechanism for its decision-maker of production, senior executives and core person with ability in pudding time. 9. Totally start information construction; optimize distribution system for wages, and management system for performance; actively enhance construction of enterprise spirit; create a working environment of harmony and upwarding. 10. Continuously strengthen the administration over the subsidiary enterprises. 11．According to its development needs, the Company will timly start refinancing plan in capital market. (III) Investment of the Company 1. Investment of the raised fund In the report period, there were no raised fund in the Company, and there were no raised fund before the report period used till the report period. 2. Investment of the non-raised fund (1) Project of transforming oil-to-gas In the report period, in order to respond to the call for Energy-saving and Emission-decreasing presented by the nation, and also to realize the switch to clean energy fuel, the project of oil-to-gas of Nanshan Power Plant (including Xindianli Company) has been executed, with a total investment of RMB 7.98 million. Respectively on Apr 22nd, 25th and Jun 11th of 2007, oil-to-gas projects for totally 3 set of 9E gas turbine have been finished, officially starting power generation by use of burning natural gas. As to the last 9E gas turbine which was planed to finish reform at the end of 2007, will finish the reform at the end of 2008 according to the needs for Shenzhen to guarantee power supply and the general programming of the Company to develop its cycle economy. The actual power generated per every gas turbine will increase 3,000 KW after reform. Meanwhile, emission will be greatly reduced to improve the air condition. In 2007, through purchasing merchandise on hand LNG by retail order, totally 1.05 billion kwh power has been generated within a year by natural gas, taking 31.5% of the total power generated by Nanshan Power Plant in a whole year. The project of oil-to-gas in the internal factory of Zhongshan Nanlang Plant has been all finished in the report period, with RMB 3.7967 million invested. At present, the relevant work for adjusting equipment is being done. And the project out of the factory will be conducted with the united arrangement of gas supplier as scheduled. The project of oil-to-gas for Dongguan Gaobu Plant has completely started in November of 2007. (2) Project of cycle economy From the year of 2005, the Company starts cooperation with the relevant governmental 34 department and scientific research organization, doing research and exploration on cycle economy. At the same time, actively responding to the policy of cycle economy and Energy-saving and Emission-decreasing advocated by the nation, the Company obtains achievement. In 2007, the Company was awarded as the the 1st Round Top Ten Enterprises Developing Cycle Economy in Shenzhen and Unit with Multi-stage Energy Cycle Utilizing. Meanwhile, in December of 2007, the Company is also listed as one of the experimental units of the 2nd round units with cycle economy confirmed by the State Development and Reform Commission and other 5 commissions. That is also to say, the Company has become one of the two experimental units of the electricity industry in the state. Project of cycle economy of the Company covers drying dirt earth, mobile heat supply, combined-supply with heat, electricity and cold and heat-supply with steam. It is aimed to form a district featuring with electricity, heat and cold supply, disposal of dirt earth, cycle utilization of resources of intermediate water using, with the plant as center. Greatly enhance the utilization rate of primary energy, decrease emission which brings pollution, and switch the plant which was originally a simple peak-shaving plant to be a comprehensive supplier with step utilization on energy covering a certain district. 1) Progress of the cycle economy project of Nanshan Power Plant The mobile heat-supply project has acquired approval (SFG (2006) No.1287) from the Development and Reform Office of Shenzhen dated Oct 26th of 2006. During the report period, RMB 2.155 million has been poured for investment, turning to be one of the 1st round demonstration units since Shenzhen has completely started demostration work of cycle economy projects. The drying dirt earth project has acquired approval from the Development and Reform Office of Shenzhen dated Oct 12th of 2007 by the document (SFG (2007) No. 1719) Answer on the Feasibility Research Report toward Drying Dirt Earth Project of Cycle Economy of Shenzhen Nanshan Power Co., Ltd, and on Oct 15th of 2007, the Company has auquired approval from the Environmental Protection Bureau of Shenzhen by the document (SHPH (2007) No. 134) Answer on the Environment Influence Report toward Drying Dirt Earth Project of Cycle Economy of Shenzhen. In the report period, the project has been listed as one of the third round projects of energy-saving and environment-protectng within the budget of the Center in 2007, enjoying RMB 10 million supports from the nation within its budget, and also listed into its programming on dirt earth disposal by Shenzhen Bureau of Urban Planning. Since now, the biding for design unit has been finished and the initial design work is being carried out. 2) Receiving approval from Zhongshan Government and the Development and Refrom Commission of Zhongshan, Shennandian Zhongshan Company is assured as the electricity source base for heat network programming of Zhongshan, and its feasibility research report of production of combined heat and electricity has got examination and estimation from experts. Besides, it has signed Natural Gas Supply Agreement with Zhonghai Oil & Gas Field Company, and the Instructions for the Prior Period Work of the Heat and Electricity Combined Production Project of Shennandian Zhongshan Gas-Steam Combined Cycle, which was finished to cooperate with the Development and Refrom Commission of Zhongshan, has been handed in to the Development and Refrom Commission of Guangdong Province. On Dec 18th of 2007, Guangdong Environmental Protection Bureau has delivered answer to the environment estimation by the document (YHS (2007) NO.499). At present, feasibility research on combined production with heat and electricity, and net for heat supply is being done. 3) Combined production with heat and electricity of Shennandian Dongguan Company has been arranged into the general programming for energy of Dongguan, the feasibility research has been examined by experts. The prior period work of the heat and electricity combined production for Dongguan Company has been approved to carry out by the Development and Refrom Commission of Dongguan. Its environment influence report 35 also gets approval from the state Bureau of Environmental Protection and identified by Guangdong Dapeng Natural Gas Company as its client. (3) Project of Jiangxi Xinchang In the report period, the Company and China Power Investment Group Co., Ltd (hereinafter refered to as Zhongdiantou) respectively poured 30% and 70% investment amount to establish Jiangxi Zhongdiantou Xinchang Power Co., Ltd(hereinafter refered to as Xinchang Company), to set and operate the two fuel and coal engineering project of 66 kw (hereinafter refered to as Xinchang project) which absorbs totally RMB 492,182 ten thousand as investment. By method of stopping the weaker and starting the stronger(stoped the set of 6.8 million per kw), the project has got answer from the State Development and Refrom Commission to carry out the prior period work and also answer for the environment estimation by document (2007 No.463) from the State Environmental Protection Bureau. In February of 2008, the construction has set off. It is estimated that the two machines will generate power respectively in December of 2009 and March of 2010. Business scope of Xinchang Company: development and construction of project of power generation with level 2*600mw, prodcution and sale of power; managing energy and utilization by step; material purchase; fuel purchase and storage; environment protection; engineering consultation; training on power technology(finally decided by the register organization). For details about this project, please refer to the relevant public notice released on Dec 15th of 2007 by the Company. (4) Capital increase of Shenzhen Energy Environmental Protection Co., Ltd Shenzhen Energy Environmental Protection Co., Ltd (hereinafter refered to as Shenzhen Energy Environmental Protection Company) is a power generation enterprise mainly engaging in generating power by garbage. It is established through assets restructure on the basis of the original Energy Environmental Protection Shennandian Engineering Co., Ltd. the Company invests registered capital of RMB 29 million to Shenzhen Energy Environmental Protection Company, hoding 10% shares. In 2006, because of the practice of the policy on garbage disposal fee, it made a turnover, from loss to profit. On Jun 8th of 2007, with decision made by the shareholders meeting of Shenzhen Energy Environmental Protection Company, it planed to increase registered capital with RMB 127.9 million. In the report period, according to the share-holding proportion, the Company increased investment with RMB 12.79 million. After the increase, the registered capital of Shenzhen Energy Environmental Protection Company has been increased to RMB 417.9 milliom. For details about this project, please refer to the relevant public notice released on Apr 24th of 2007 by the Company. (IV) Routine work of Board of Directors of the Company 1. Meetings of Board of Directors In the report period, the Board of Directors held 7 meetings, and successively organized 2006 Annual Shareholders’ General Meeting ， 2007 1st Extraordinary Shareholders’ General Meeting ， 2007 2nd Extraordinary Shareholders’ General Meeting,2007 3rd Extraordinary Shareholders’ General Meeting, 2006 4th Extraordinary Shareholders’ General Meeting and three Special Committee Meeting of Board of Directors. The detailed meetings were as follows: (1) On March 16, 2007, the 3rd Meeting of the 5th Board of Directors was held, and the resolutions of the meeting were published in newspapers designated by the Company dated on March 20th, 2007, as well as on website designated by CSRC. (2) On April 23, 2007, the 4th Meeting of the 5th Board of Directors was held, and the resolutions of the meeting were published in newspapers designated by the Company dated on April 24th, 2007, as well as on website designated by CSRC. (3) On July 23, 2007, the 5th Meeting of the 5th Board of Directors was held, and the 36 resolutions of the meeting were published in newspapers designated by the Company dated on July 25th, 2007, as well as on website designated by CSRC. (4) On Aug. 20, 2007, the 6th Meeting of the 5th Board of Directors was held, and the resolutions of the meeting were published in newspapers designated by the Company dated on Aug. 22nd, 2007, as well as on website designated by CSRC. (5) On Sep. 27, the 7th Meeting of the 5th Board of Directors was held, and the resolutions of the meeting were published in newspapers designated by the Company dated on Sep. 29th, 2007, as well as on website designated by CSRC. (6) On Oct. 26, 2007, the 8th Meeting of the 5th Board of Directors was held, and the resolutions of the meeting were published in newspapers designated by the Company dated on Oct. 27th, 2007, as well as on website designated by CSRC. (7) On Dec. 14, 2007, the 9th Meeting of the 5th Board of Directors was held, and the resolutions of the meeting were published in newspapers designated by the Company dated on Dec. 15th, 2007, as well as on website designated by CSRC. Information disclosure is on the designated newspapers: China Securities, Securities Times and Hong Kong Wen Wei Po, and also on the website http: //www.cninfo.com.cn designated by CSRC. 2. Implementation of the resolutions of the Board of Directors In the report period, according to relevant resolutions made in Shareholders’ General Meeting, successively organized work as follows: (1) Paid domestic and foreign audit organizations for their 2006 remunerations, engaged 2007 domestic and foreign audit organizations; (2) Completed procedures for editing reserve of Articles of Association. At the same time, the Board of Directors actively participate in check and research of significant projects and made prompt and correct decision about significant investment and work affairs such as the change from oil to gas, the exploitation of circular economic project of the subordinate power plants of the Company, guaranteed the normal running of the operation and management of the Company. 3. Summary report on implementation of duties of Auditing Committee In the report period, the auditing committee earnestly cooperated duties for board of directors, carefully examined regular report, internal control system, work of employed certified public accountants of 2008. In the report period, auditing committee made lots of effort in 2007 auditing of the Company, in accordance with related regulations of CSRC. Before annual CPI entered, the auditing committee held 2007 Annual Report Auditing Meeting, listened to Annual Auditing Working Plan presented by certified public accountants, and made 2007 Annual Auditing Arrangement and important auditing field. At the same time, the Company carefully checked unexamined annual financial report. The auditing committee made written suggestions considering: according to new Accouting Stantdards for Business Enterprises and combining its actual condition, the Company made reasonable financial policies and proper financial assess. Information disclosed in financial report was accurate, correct and complete, and was agreed to submit to annual CPA for annual auditing. After annual CPA entered, members of auditing committee had lots of communications with responsible person of the project, hold meeting on March 10, 2008, explained auditing work development and focused problem by accountant in detail, urged certified public accountants develop auditing work according to whole auditing plan to ensure finishing annual auditing and information disclosure to the working plan. After annual CPA presenting original auditing suggestions, auditing committee hold meeting again, examined financial report and made written suggestions considering: The Company had no difference on significant problems with annual CPA, and financial report of the Company is in accordance with enterprise financial codes and related laws and regulations. 37 Auditing committee considered: PricewaterhouseCoopers Zhongtian Certified Public Accountants has professional auditing group as well as precise working moral. During the auditing, the accountants strictly conformed to auditing regulations, had strol risk control knowledge, focused on establishment and implementation of the internal control systme of the Company and paid attention to communication with the Company. And the Company had long term cooperation relationship with the Company, and had the ability to finish aduting work for the Company. Through research and decision made by auditing committee, PricewaterhouseCoopers Zhongtian Certified Public Accountants was submited to the board of director for being employed as the auditing organization of 2008. 4．Summary report of remuneration committee and appraisal committee duty carrying In the report period, remuneration committee and appraisal committee actively took their responsibility, held special meeting to exam implementation of 2006 Remuneration Provision and Operation Examining Encouragement & Punishment Plan, checked 2007 Remuneration Provision and Operation Profit Target Examining Encouragement & Punishment Plan, perfected remuneration strategy encouragement as well as restriction, fully made use of investment value of human resource in the period to create conditions for realizing greater profit. The remuneration committee paid lots of attention to making of equity encouragement plan, got to know its development many times and made suggestions on related problems. 5. Preplan on Profit Distribution or Converting Capital Public Reserve into Share Capital in 2007 Audited by PricewaterhouseCoopers Zhongtian Certified Public Accountants, the net profit realized by the parent company in 2007 was RMB 125,948,000. According to relevant provisions of the Articles of Association, withdrawal of 10% statutory public reserve amounted to RMB 12,594,800. In 2007, the profit available for distribution of parent company to the shareholders amounted to RMB 314,075,000, the profit available for distribution to the shareholders after consolidation was RMB 481,996,000. According to relevant provisions of the State Ministry of Finance (CKZi (1995) No. 31 and China Securities Regulatory Commission ZJH (1994) No. 1, based on the principle of soundness and the lower of the two, the profit available for distribution to shareholders was worked out according to the domestic consolidation in 2007, namely RMB 314, 075, 000. On the principle of paying back to investors as well as future persistent development, the Company planed to has the basis of 547,965,998 total shares, giving one share every 10 shares and RMB 0.3 (tax included), and balance would be transferred into next year. Asset collection will not be transferred into added shares this year. 6. Information disclosure In the report period, according to the requirements of supervising department and relevant laws and regulations, the Board of Directors promptly and exactly disclosed the fixed and temporary public notices amounting to 60. VIII. Report of the Supervisory Committee (I) Work of the Supervisory Committee According to relevant laws and regulations of the state and the Articles of the Association, the Supervisory Committee seriously fulfilled its duties. In the report period, the Supervisory Committee held 6 meetings, and attended all meetings of the Board of Directors with the details as follows: 1. On March. 16, 2006, the 3rd Meeting of the 5th Board of Directors was held, and the resolutions of the meeting were published in newspapers designated by the Company 38 dated on March 20th, 2007. as well as on website designated by CSRC. 2. On April 23, 2007, the 4th Meeting of the 5th Board of Directors was held, and the resolutions of the meeting were published in newspapers designated by the Company dated on April 24th, 2007. as well as on website designated by CSRC. 3. On July 23, 2007, the 5th Meeting of the 5th Board of Directors was held, and the resolutions of the meeting were published in newspapers designated by the Company dated on July 25th, 2007. as well as on website designated by CSRC. 4. On Aug. 20, 2007, the 6th Meeting of the 5th Board of Directors was held, and the resolutions of the meeting were published in newspapers designated by the Company dated on Aug. 22nd, 2007. as well as on website designated by CSRC. 5. On Sep. 27, the 7th Meeting of the 5th Board of Directors was held, and the resolutions of the meeting were published in newspapers designated by the Company dated on Sep. 29th, 2007. as well as on website designated by CSRC. 6. On Oct. 26, 2007, the 8th Meeting of the 5th Board of Directors was held, and the resolutions of the meeting were published in newspapers designated by the Company dated on Oct. 27th, 2007. (III) The Supervisory Committee’s independent opinions on the following events 1. The Company’s operation according to laws In the report period, the Supervisory Committee attended all meetings of the Board of Directors and seriously supervised on all decisions; significant operating and investing behaviors; implementations of resolutions made by Shareholders’ General Meeting, and executed duties of supervisors. The Supervisory Committee considered that the Company could develop all productive and operative business according to the relevant laws and regulations of Company Law, Security Law, Listing Rules of Shenzhen Stock Exchange and Articles of Association. The Company successfully completed special governance activity, established and perfected legal administration structure, made relatively perfect internal control and management system. Significant decision making procedure is legal and effective. The Company fulfilled information disclosure duties of 2007 according to requirements of supervisory department. Directors and senior executors of the Company all abided by regulations of relevant laws, regulations of the Articles of the Association of the Company and decisions made by shareholders’ meeting and board of director’s meeting in executing the duties of the Company; and were loyal to their positions, worked diligently to explore and develop. There found no behavior against laws, regulations and Article of Association in directors and senior executors’ executing the duties of the Company as well as no behavior of hurting interest of shareholders and the Company. 2. Inspecting the Company’s finance In the report period, the Supervisory Committee seriously checked and examined auditors’ report and other accounting materials of the Company. The Supervisory Committee considered that finance and financial system of the Company is complete; financial checking is standard; and financial disposal is strictly accordance with Enterprise Financial Codes and related state regulations. 2007 auditor’s report of Standard No Reservation Suggestion for the Company presented by PricewaterhouseCoopers Certified Public Accountants completely, accurately, fairly and objectively reflected financial status and operation achievements of the Company. 3. Use of raised funds The actual project put in with the latest raised funds of the Company accorded with the project committed. 4. Transactions of purchase and sale of assets of the Company The supervisory committees considered that purchasing and asset transaction in the report period do not belong to related transactions; decision make procedure is legal, transaction price is fair and reasonable; no internal transaction is detected; no interest of other shareholders is hurt; and no asset loss to the Company occurs, which has a good 39 foundation for its long term development. 5. Related transactions The supervisory committee considered that, in the report period, related transactions of the Company belong to ordinary operation scope, and decision making procedure is legal for not hurting interest of other shareholders. 6. Self commenting suggestions for internal control system of the Company (I) According to related regulations by CSRC and Shenzhen Stock Exchange, abide by internal basic principle of control system, the Company established and perfected every procedure of internal control system, thus ensuring ordinary business activity and protecting security and completeness of it asset. (II) In 2007, there had no infringement to Guidelines of Internal Control System by Shenzhen Stock Exchange as well as internal control system. In a word, the supervisory committee considered that self assessing for internal control system of the Company is complete, accurate and exact, and reflects the actual facts of its internal control system. IX. Significant Events (I) In the report year, the Company had no significant lawsuits or arbitrations. (II) In the report year, the Company had no bankruptcy and related reforming issues. (III) The Company had no equity of other listed companies, share participating commercial bank, Security Company, insurance company, trust companies, futures companies and other financial enterprises. (IV) Purchasing, asset selling, absorbing and consolidating issues 1. On Sep. 28 of 2006, the Company has signed the following contract with Zhongshan Power Exploitation Co., Ltd: An Contract about Transferring the Share Equity of Zhongshan Power Plant Co., Ltd. and Zhongshan Zhongfa Electric Power Co., Ltd which says the Company will purchase Zhongshan Power Exploitation Co., Ltd’s holding 75% equities from the above two companies at the method of no price debt. On Sep.30, 2007, Zhongshan Supervision & Administration Office of China Banking Regulatory Commission offered a letter to Zhongshan Administration for Industry and Commerce, which showed that Zhongshan Zhongfa Power Co. Ltd. and Bond Bank had no disagreement to the transfer of equity. Zhongshan Power Plant and Zhongfa Power handled relevant transfer procedures of Industry and Commerce, and the transfer of equity was completely finished. According to Opinions of the National Development and Reform Commission and the Energy Office on Accelerating the Closedown of Small Firepower Generators (No. 2 [2007] of the State Council), Zhongshan Power Plant and Zhongfa Power, as local diesel power industry, were listed in the range of state policy of closing down thermal power generating unit, and completely stopped production from Mar.31. After the seventh meeting of the fifth Board of Directors on Sep.27, 2007 and the second extraordinary shareholders’ meeting on Oct.15, 2007 which passed Proposal for Debt Restructuring, Assets Revitalization and Enterprise Transfering Nature of Zhongshan Zhongfa Power Co. Ltd. and Zhongshan Power Plant Co. Ltd., with the guidance of closing down policy, Zhongshan Power Plant and Zhongfa Power came into the phase of debt restructuring, assets revitalization and land development. (1) Debt restructuring that had implemented In the report period, with the direct participation and leading of shareholders and several coordination of Zhongshan Government, the Company and all loan banks decided debt restructuring Project and studied out agreement (intension) of debt restructuring frame. On Sep.20, 2007, Zhongshan Government officially replied and approved in Reply of Several 40 Issued of Closing Down Zhongshan Power Plant Co. Ltd. and Zhongfa Power Co. Ltd. promulgated by ZFBF [2007] No.215. In November of 2007, shareholders of the two sides remitted loan restructuring funds of Bank of China to the loan account in Zhongshan Branch Bank of Bank of China according to equity proportion, settled loans (received Notice of Loans Settlement of Zhongshan Branch Bank of Bank of China) and gained interest deduction of RMB 64,678,000, which realized restructuring benefits of RMB 48,508,500 according to equity. (2) Disposal of assets i) Disposal of fixed assets such as sets and equipments Whereas Zhongshan Power Plant and Zhongshan Power was listed in the range of closing down, equipments for generating electricity of Zhongshan Power Plant had reached their economic life, only left book value, and main fixed assets of Zhongfa Power such as workshop, sets and equipments had no operation value at home, according to the audit report of Zhongfa Power offered by Lixin Yangcheng Certified Public Accountants Co. Ltd. on Sep.25, 2007, origin book value of fixed assets of Zhongfa Power was RMB 519,930,000, which was RMB 124,280,000 after devaluation, with 76.1% devaluation of fixed assets, and according to the decision of the second extraordinary shareholders’ general meeting, Zhongfa Power planed to dispose main production equipments in public way such as tendering and bidding, with estimated recovery ratio of 23.9% (calculated according to the origin bokk value of fixed assets). ii) Disposal of current assets such as inventory Because Zhongfa Power did not completely stop operation in March of 2007, in order to primarily release the financial stress caused by stopping production and operation, working group of assets disposal composed by representatives of functional department and shareholders was in charge of disposal of some idle assets such as waste materials, fuel inventory and vehicles, accumulated realizable value of RMB 4,990,000, which could maintain the demand of daily operation management of the Company. The aforesaid incomes of assets disposal will use to maintain daily expenses, pay salaries of about 300 staffs, settle compensation and repay history debts. 2. Exclusively-owned oversea subsidiary Syndisome Co., Ltd. purchased 40% equity of Shennandian Engineering Co. Ltd. held by Hongkong Southern Power Co., Ltd Founded jointly in Feb. 2004, Shennandian Engineering Co. Ltd., with registered capital of RMB 10 million, respectively had equity with Hongkong Southern Power Co., Ltd. 60% and 40%. Passed on the 8th meeting of the 5th directors’ meeting dated on Oct. 26, 2007, the Company’s xclusively-owned oversea subsidiary Syndisome Co., Ltd. will use RMB 7.52 million to purchase Shenzhen Nanshan Power Project Co., Ltd. ‘s of 40% equities owned by Hongkong Southern Power Co., Ltd. Until Sep. 30, 2007, the accessing price of the equity is RMB 31,740,200, and the purchasing price is below the assessing price with RMB 24,220,200. On Nov.1 2007, the Company’s fully funded subsidiary Syndisome Co., Ltd. made Equity Transferring Agreement with Hongkong Southern Power Project Co., Ltd. After finishing administration change procedures on Dec.17, 2007, Shennandian Engineering Co., Ltd. became fully-funded subsidiary of the Company. 3. Exclusively-owned oversea subsidiary Syndisome Co., Ltd. purchasing Shennandian (Dongguan) Weimei Electric Power Co., Ltd’s 15% equities owned by Hongkong Xinyuan Co., Ltd. Shennandian (Dongguan) Weimei Electric Power Co., Ltd was founded on Aug. 10, 2004, with registered capital of RMB 379,290,000. The equity proportion of the Company, Syndisome Co., Ltd, Hongkong Xinyuan Co., Ltd, Shennandian (Dongguan) Weimei Ceramic Industrial Park Co., Ltd and Dongguan Gaobu Industry Development Co., Ltd. are respectively 40%, 15%, 15%, 20% and 10%. Through examination and approval of the 8th meeting of the 5th directors’ meeting on Oct. 26, 2007, the Company’s fully-funed 41 oversea subsidiary Syndisome Co., Ltd. will use RMB 49,480,000 to purchase Shennandian (Dongguan) Weimei Electric Power Co., Ltd’s 15% equities owned by Hongkong Xinyuan Co., Ltd. The assessing price of the equity was RMB 55, 276,800 until Sep. 30, 2007, and the purchasing price is below the assessing price with RMB 55, 276,800. Hongkong Xinyuan Co., Ltd. transferred its owned 15% equities to the Company’s fully funded oversea subsidiary Syndisome Co., Ltd on Nov. 11, 2007, and all changing procedures have been finished on Dec. 26, 2007. At present, the equity proportion of the Company, Syndisome Co., Ltd, Dongguan Weimei Ceramic Industrial Park Co., Ltd and Dongguan Gaobu Industry Development Co., Ltd. are respectively 40%, 30%, 20%, and 10%. (V) Implementation of equity incentive plan The Company will conform to guideline spirit and arrangement of its charging departments, according to related regulations of the State as well as combining development trends and actual condition of the Company, to have wide communication with shareholders, organize relevant department and professional agencies, make research and feasible equity incentive plan, and submit to board of directors’ meeting and shareholders’ meeting for approval and implementation. (VI) Significant related transactions 1. Related transactions about routine operation In the report period, routine related transactions of the Company are as follows: Related Occurred Proportion of Related parties Description of transaction transaction the same type related transaction type amount in 2007 transaction Shenzhen Moon Bay Oil Leasing Warf leasing RMB8,250,000 100% Port Co., Ltd Shenzhen Mawan Power Leasing Leasing of pipe lay RMB1,790,000 100% Co., Ltd. In the report period, the Company had no related transactions about routine operation 2. Related transactions of asset purchasing and selling In the report period, the Company had no related transactions about assets and share equity transfer. 3. Related transactions occurred of investment together by the Company and related parties (1) Capital increase of Shenzhen Energy Environmental Protection Co., Ltd In the report period, with examination and approval in the 4th meeting of the 5th board of directors of the Company, the Company increases investment to Shenzhen Energy Environmental Protection Co., Ltd ( established by joint investment from the Company and its related party-Shenzhen Energy Group Co., Ltd) with RMB 12.79 million according to its share-holding proportion 10%. This company is a power generation enterprise mainly engaging in generating power by garbage. It is established through assets restructure on the basis of the original Energy Environmental Protection Shennandian Engineering Co., Ltd in 2000. After the increase, the registered capital of Shenzhen Energy Environmental Protection Company has been increased to RMB 417.9 million, among which RMB 41.79 million is offered by the Company. For details about this project, please refer to the relevant public notice released on Apr 24th of 2007 by the Company. On Dec 31st of 2007, the total assets of the company amounts to RMB 117,711.25 ten thousand, RMB 43,980.20 ten thousand for the net assets and RMB 4,329.17 ten thousand has been realized for the net profit of the company. During the report period, the progress 42 of the second phase project of Nanshan Garbage Power Plant and the engineering project in Longgang Industry Park is as follows: 1) The professional examination and public investigation on environment estimation for the second phase project of Nanshan Garbage Power Plant have been finished. Environment estimation report has been formed in December and handed in to the estimation center of the State Environment Protection Bureau; 2) The Garbage Burning Factory in Longgang Industry Park is listed as one of the key projects of Shenzhen. It is located in Jiaowo, with the construction scale being 2,500 tons garbage per day. The general examination meeting on environment estimation has been finished during the report period. (2) Capital increase of Tongling Wanneng Power Plant Co., Ltd With examination and approval in the 8th meeting of the 5th board of directors of the Company, it is agreed for the Company to increase investment to Tongling Wanneng Power Plant Co., Ltd (established by joint investment from the Company and its related party-Shenzhen Energy Group Co., Ltd) with RMB 29.64 million according to its share-holding proportion 3.8%, which was paid according to the progress of the construction of the project. In the report period, the Company actually poured investment of RMB 7.41 million. After the increase, the registered capital of Tongling Wanneng Power Plant Co., Ltd has been increased to RMB 1.404 billion, among which RMB 5,335.2 ten thousand is offered by the Company. For details about this project, please refer to the relevant public notices released respectively on Oct 27th and Nov 13th of 2007 by the Company. On Dec 31st of 2007, the total assets of the company amounts to RMB 274,365.91 ten thousand, RMB 49,430.55 ten thousand for the net assets and RMB -37,244.67 ten thousand has been realized for the net profit of the company. During the report period, the progress of the 6 phase project of the company is as follows: 1) Receive reply by letter from the State Development and Refrom Committee to agree the 1×1000MW set in the 6th phase project of Adopting Stronger and Stopping Weaker to carry out the prior period work. 2) Officially acquired the environment influence report and other 3 supportable documents; finished the work of inviting public bidding for the general contract of the project EPC, and initially signed the General Contract Agreement. 3) Finished the work of inviting public bidding for the equipments such as the designing supervision, construction supervision and three mainframes for the project. 4) The initial design of the project has passed the pre-examination of the Power Programming and Designing Institute; 5) Establish leading team of second level relocation of the 6th phase project and the relocation office. Draw out the plan and scheme for the relocation; 6) The stop of 2×125MW set has got confirmation from the State Development and Reform Committee. Application report for approving the 6th phase project has been handed in to the State Development and Reform Committee by the provincial Development and Reform Committee dated Nov 2nd of 2007. 4. There existed current credits and liabilities and guarantees between the related parties (including subsidiaries not listed into consolidated scope) and the Company. (1)Current liabilities and debts Unit: RMB’0000 Supply funds to related parties Supply funds to listed compan The relationship by listed company by related parties Related parties with listed Occurred Occurred company Balance Balance amount amount Shenzhen Xiefu Oil Supply Co.,Subsidiary 3,352.00 4,664.20 43 Ltd. Shennandian (Zhongshan) Subsidiary 6,723.80 6,957.90 Power Co., Ltd. Zhongshan Zhongfa Power Co., Subsidiary 47,354.70 47,354.70 Ltd Zhongshan Power Plant Co., Ltd Subsidiary 51.70 51.70 Shenzhen Shennandian Gas Engines EngineeringSubsidiary -1,184.20 213.30 Technology Co., Ltd Shennandian (Dongguan) Subsidiary -5,931.20 Weimei Electric Power Co., Ltd Shenzhen New Power Industrial Subsidiary 11,662.70 36,648.00 Co., Ltd. Shenzhen Energy Group Co., Shareholder party -1.50 119.00 Ltd. Huidong Xiefu Port Subsidiary’s Comprehensive Development 4,263.60 subsidiary Co., Ltd. Shenzhen Mawan Power Co., Subsidiary of -14.90 28.10 Ltd. shareholders Shenzhen Moon Bay Oil PortSubsidiary of 17.00 109.60 Co., Ltd shareholders Total 47,014.80 58,841.20 15,015.30 41,568.90 （2）Guarantee offered by the Company to related parties Unit: RMB’0000 The relationship with listed Guarantee amount Guaranteed party company （Dec.31,2007） Shennandian (Zhongshan) Power Co., Holding subsidiary 62,100.00 Ltd. Shennandian (Dongguan) Weimei Power Holding subsidiary 35,370.50 Co., Ltd Shenzhen Xiefu Oil Supply Co., Ltd. Holding subsidiary 16,669.80 Total 114,140.30 In the report period, the Company provided anti-guarantee of RMB 58,254,000 in total to Anhui Energy Group Co., Ltd, Anhui Energy Holding Co. Ltd and Shenzhen Energy Group Co., Ltd for loan guarantee of Anhui Tonglin Energy Co., Ltd. Independent directors’ explanation of external guarantee and suggestions: According to related regulations of Notice concerning some issues on Regulating the Funds between Listed Companies and Associated Parties and Listed Companies’ Provision of Guaranty to Other Parties (No. 56 [2003] Promulgated by CSRS), Notice on Strengthening Funds Possession and Irregular or Inappropriate Provision of Guaranty Information Disclosure (No. 338 [2004] Promulgated by Shenzhen Bureau) and Notice on External Security by Listed Companies (No. 120 [2005] promulgated by CSRC), through knowing of the Company and checking of information, we made special explanation of external guarantee and suggestions of this period: Until Dec. 31, 2007, the Company’s external guarantee balance is RMB 1,141,403,000(this is guarantee from its subsidiary’s bank loan). The Company and its subsidiaries had no other guarantee to other related parties and any illegal company or individual, and the Company fully carried its information disclosure responsibility of external guarantee. 44 5. Other significant related transactions There had no other significant related transactions of the Company. (V) Significant contracts of the Company and its implementation 1. In the report period, the Company had custody, contract or lease matters. In according to the Operation Contract on Asset Custody of Gas-Steam Combined Cycle Heat Power Generation Set; the Company continued to be entrusted to take management on the power generation asset ownded by wholly-funded New Power Company. In the report period, the Company received the labor expense for asset custody. Except that, there were no significant custody, contract or lease matters. 2. Significant guarantee In the report period, external guarantee of the Company took legal approval procedure, and details are as follows: Unit: RMB’0000 Particulars about the external guarantee of the Company (Barring the guarantee for the controlling subsidiaries) Name of the Date of happening Amount Complete Guarantee Guarantee Guarantee for related Company (date of signing of Implement type term party (yes or not) guaranteed agreement) guarantee ation or not Total amount of guarantee in the - - - - - report period Total balance of guarantee at the end - - - - - of the report period (A) Guarantee of the Company for the controlling subsidiaries Total amount of guarantee for controlling subsidiaries in the report 90,011.50 period Total balance of guarantee for controlling subsidiaries at the end of 114,140.30 the report period (B) Particulars about the external guarantee of the Company (Including the guarantee for the controlling subsidiaries) Total amount of guarantee (A+B) 114,140.30 The proportion of the total amount of guarantee in the net assets of the 66.17% Company Including: Amount of guarantee for shareholders, actual controller and its related parties - The debts guarantee amount provided for the guarantee of which the 114,140.30 assets-liability ratio exceeded 70% directly or indirectly Proportion of total amount of guarantee in net assets of the Company - exceeded 50% Total amount of the aforesaid three 114,140.30 guarantees 3. In the report period, the Company didn’t entrust others to manage cash assets. 4. In the report period, the Company had no other significant contracts. (V) Implementation of commitment of the Company 1. The original non-circulating shareholders of the Company didn’t make any commitment except statutory commitments in Share Merger Reform. 45 2. In the report period, the Company or shareholders who held over 5 %( including 5%) of the total shares haven’t had any commitments that happened or happened before but lasted to the report period which could significantly influence the operational and financial results. (VI) The Company’s engagement of certified public accounts and payment of remunerations in the report period With the approval in the 2006 Annual Shareholders’ General Meeting, the Company reengaged Guangzhou Yangcheng Certified Public Accountants Ltd as the domestic audit organization for the Company in year 2007, and reengaged PricewaterhouseCoopers Certified Public Accountants as the overseas audit organization for the Company in year 2007. The aforesaid two CPAs were successively annual audit organizations for the Company since the Company was listed in Stock Exchange in 1994. In according to regulations in Document ZJKJZi [2007] No. 30 Notice on the Relevant Issue about the Auditing of the Companies That Issue the Domestically Listed B-shares in Foreign Currencies promulgated by China Securities Regulatory Commission, with the examination and approval in the 9th meeting of the 5th Board of Directors and the 4th Extraordinary Shareholders’ General Meeting in 2007 of the Company, the Company only engaged PricewaterhouseCoopers Certified Public Accountants as the 2007 annual audit organization. By authorization of the 4th Extraordinary Shareholders’ General Meeting of 2007 and examination and approval of the 10th meeting of the 5th Board of Directors: Agreed to pay RMB 1.3 million for the 2007 annual audit remunation, and all the business trip expenses for the audit were also born by the Company. At the beginning of 2008, its affiliated organization PricewaterhouseCoopers Zhongtian Certified Public Accountants has taken annual audit on the Company and issued the standard unqualified Auditor’s Report for the Company. (VII) The Company, directors, supervisors, senior executors, shareholders of the Company, actual controllers and purchasers had no issues related to authorized departments’ investigation, forced measures taken by judicial department, being sent to judicial department or investing criminal responsibility. (VIII) In the report period, there had no significant events listed in the Security Law. (IX)The received research and interview from investors of the Company In the report period, the Company further strengthened investor relationship management and made Information Disclosure Management System as well and Working System for Reception and Promotion to promote active mutual relation of the Company and its investors, thus increasing the Company’s value and shareholders’ interest. During the report period, the management on investor relation of the Company is mainly operated through the maintenance of the interacting platform of investor relation and daily phone inquiry. The Company has never received any investor for spot investigation and interview. During the report period, the Company has totally offered answers for the consultation from the interacting platform for investor relation and inquiry from the phone over 40 times, which are mainly focusing on the reply for the production, operation and administration of the Company (website of the interacting platform for investor relation: http://irm.p5w.net/000037/index.html). 46 X. Financial Report PricewaterhouseCoopers Zhongtian Certified Public Accountants audited the financial reports of the Company and issued standard unqualified report. (Attached) XI. Documents Available for Reference (I) Accounting statements carried with the signatures and seals of the legal representative, financial principal and accountants. (II) Original of auditors’ report carried with the seal of certified public accountants and signatures and seals of CPA (III) All original of the Company’s documents and original manuscript of public notices ever disclosed in Securities Times, China Securities, and Hong Kong Wen Wei Po in the report period. (V) Annual Report disclosed in overseas newspapers Board of Directors :Wei Wende Shenzhen Nanshan Power Co., Ltd. April 17, 2008 47 PricewaterhouseCoopers Zhong Tian CPAs Limited Company 11F, PricewaterhouseCoopers Center, 202#, Hu Bin Road, Shanghai, P.R.C. Post code: 200021 Tel +86 (21) 6123 8888 Audit Report Fax +86 (21) 6123 8800 pwccn.com PricewaterhouseCoopers Zhong Tian Shen Zi (2008) No.10034 (Page 1/2) To all shareholders of Shenzhen Nanshan Power Co., Ltd: We have audited the accompanying consolidated financial statements and financial statements of Parent Company of Shenzhen Nanshan Power Co., Ltd (hereinafter shortened as “Nanshan Power Company”) and its subsidiaries (together called as “Nanshan Power Group”), which comprise Consolidated Balance Sheet and Balance Sheet of Parent Company as of December 31, 2007, Consolidated Profit Statement and Profit Statement of Parent Company 2007, Consolidated Cash Flow Statement and Cash Flow Statement of Parent Company 2007, Consolidated Statement of Changes in Equity and Statement of Changes in Equity of Parent Company 2007, and notes to financial statements. I. Management’s responsibility for the financial statements Management of Nanshan Power Group and Nanshan Power Company is responsible for the preparation of these financial statements in accordance with requirements of Accounting Standards for Business Enterprises. This responsibility includes: (1) Designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; (2) Selecting and applying appropriate accounting policies; (3) And making accounting estimates that are reasonable in the circumstances. II. Auditor’s responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Auditing Standards for CPAs of China. These standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. PricewaterhouseCoopers Zhong Tian Shen Zi (2008) No.10034 (Page 2/2) An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. III. Audit Opinion In our opinion, consolidated financial statements and financial statements of the parent company of the aforesaid Nanshan Power Group and Nanshan Power Company have been compiled in accordance with Accounting Standards for Business Enterprises, which present fairly, in all material respects, the financial position of Nanshan Power Group and Nanshan Power Company as of December 31, 2007, and its operating results and its cash flow for the year then ended. PricewaterhouseCoopers Zhong Tian CPA CPAs Limited Company Lu Xulei Shanghai • China CPA April 15, 2008 Pan Yaojian 49 SHENZHEN NANSHAN POWER CO., LTD Notes to the Financial Statements 2007 Shenzhen Nanshan Power Co., Ltd Consolidated Balance Sheet and Balance Sheet of Parent Company as of December 31 2007 December 31 December 31 December 31 2006 December 31 2006 2007 Consolidated 2007 Parent Company Consolidated RMB thousand Parent Company RMB thousand Note RMB thousand Yuan RMB thousand Yuan Assets Yuan (Restated) Yuan (Restated) (Note 2) (Note 2) Current assets Monetary fund VII(1) 419,172 623,514 125,774 347,051 Account VII (2), X receivable (1) 619,344 586,884 233,251 163,756 Prepayment VII (3) 34,342 43,618 3,352 2,076 Dividend receivable - - 530,319 412,216 Other notes VII (2), X receivable (1) 33,724 81,401 549,172 112,513 Interest receivable 1,516 - - - Inventory VII (4) 367,972 379,643 261,965 197,577 Total current assets 1,476,070 1,715,060 1,703,833 1,235,189 Non-current assets Long-term investment on VII7(5), stocks X (2) 113,085 71,885 557,268 516,068 Fixed assets VII (6) 2,855,996 2,826,879 475,784 519,063 Construction-in- process VII (7) 21,163 52,165 10,619 14,870 Liquidation of fixed assets 1 49 1 49 Intangible assets VII (8) 1,067,353 90,118 5,913 32,912 Long-term deferred and prepaid expenses VII (9) 2,762 5,303 1,928 4,057 Deferred income tax assets VII (19) 16,484 10,299 12,720 8,221 -9- SHENZHEN NANSHAN POWER CO., LTD Notes to the Financial Statements 2007 Total non-current assets 4,076,844 3,056,698 1,064,233 1,095,240 Total assets 5,552,914 4,771,758 2,768,066 2,330,429 - 10 - SHENZHEN NANSHAN POWER CO., LTD Notes to the Financial Statements 2007 Shenzhen Nanshan Power Co., Ltd Consolidated Balance Sheet and Balance Sheet of Parent Company as of December 31st, 2007 (continued) December 31st, December 31st, December 31st 2006 December 31 2006 2007 Consolidated 2007 Parent Company Consolidated RMB thousand Parent Company RMB thousand Liability and owners’ Note RMB thousand Yuan RMB thousand Yuan equity Yuan (Restated) Yuan (Restated) (Note 2) (Note 2) Current liabilities Short-term VII borrowing (10) 2,484,735 1,822,670 975,020 574,523 VII Notes payable (11) 254,090 428,543 - 163,516 VII Account payable (12) 165,091 49,648 49,285 12,939 VII Deposit received (13) 689 600 - - Accrued wages VII14) 68,411 56,955 47,239 33,997 VII Tax payable (15) (176,592) (96,097) (163,923) (87,529) Accrued interest payable 45,023 4,602 1,685 872 VII Dividend payable (16) 9 9 9 9 VII Other payables (17) 563,248 72,136 375,032 264,331 Non-current liabilities due in VII one year (18) 106,000 308,111 - Total current liabilities 3,510,704 2,647,177 1,284,347 962,658 Non-current liabilities VII Long-term loans (18) 176,000 330,203 - 10,000 Total non-current liabilities 176,000 330,203 - 10,000 Total liabilities 3,686,704 2,977,380 1,284,347 972,658 - 11 - SHENZHEN NANSHAN POWER CO., LTD Notes to the Financial Statements 2007 Shareholders’ equity I, VII Capital stock (20) 547,966 547,966 547,966 547,966 VII Capital reserve (21) 363,630 345,119 288,769 288,769 VII Surplus reserve (22) 332,909 320,314 332,909 320,314 Undistributed profit 481,996 376,505 314,075 200,722 Translation difference in foreign currency statements (1,482) (3,080) - - Total equity attributable to parent company 1,725,019 1,586,824 1,483,719 1,357,771 VII Minority equity (24) 141,191 207,554 - - Total owners’ equity 1,866,210 1,794,378 1,483,719 1,357,771 Total liabilities and owners’ equity 5,552,914 4,771,758 2,768,066 2,330,429 The notes to the financial statement are the integral part of the financial statements. Legal representative: Person in charge of accounting: Person in charge of accounting Department: - 12 - SHENZHEN NANSHAN POWER CO., LTD Notes to the Financial Statements 2007 Shenzhen Nanshan Power Co., Ltd Consolidated Profit Statement and Profit Statement of Parent Company 2007 December 31st, 2006 2006 December 31 Parent 2007 Consolidated 2007 Company Consolidated RMB Parent RMB RMB thousand Company thousand thousand Yuan RMB Yuan Item Note Yuan (Restated) thousand (Restated) (Note 2) Yuan (Note 2) VII (25), X 1. Operating revenue (3) 3,620,124 3,874,579 1,236,905 1,410,352 VII (25), X Minus: operating costs (3) (3,788,089) (4,046,729) (1,634,165) (1,687,830) Sales tax and associate charge VII (26) (6,089) (4,254) (1,797) (2,518) Sales expenses (2,165) (4,658) - - Administrative expenses (103,410) (88,146) (32,585) (34,183) Finance charge-net amount VII (27) (126,981) (119,656) 772 (28,295) Assets depreciation loss VII (28) (4,645) (8,719) (2,470) (966) VII (29), Plus: investment income X(4) - 2,206 137,845 19,742 Where: investment income from associated enterprise - - - - 2. Operating deficit (411,255) (395,377) (295,495) (323,698) Plus: non-operating revenue VII (30) 509,339 450,008 417,957 446,667 Minus: non-operating expense (3,121) (319) (100) (279) Where: disposal loss on non-current assets - - - - 3. Total profit 94,963 54,312 122,362 122,690 Minus: income tax expense VII (31) 2,583 2,980 3,586 (15,471) - 13 - SHENZHEN NANSHAN POWER CO., LTD Notes to the Financial Statements 2007 4. Net profit 97,546 57,292 125,948 107,219 Net profit attributable to shareholders of parent company 118,086 63,133 125,948 107,219 Minority interest income (20,540) (5,841) - - 5. Earnings per share (based on consolidated net profit attributable to common-share holders of parent company) VII (32) Basic earnings per share VII (32) 0.22 0.12 - - Diluted earnings per share VII (32) 0.22 0.12 - - The notes to the financial statement are the integral part of the financial statements. Legal representative: e Person in charge of accounting: Person in charge of accounting Department: - 14 - SHENZHEN NANSHAN POWER CO., LTD Notes to the Financial Statements 2007 Shenzhen Nanshan Power Co., Ltd Consolidated Cash Flow Statement and Cash Flow Statement of Parent Company 2007 2006 2007 Parent 2007 Parent Company 2006 Consolidated Company RMB Consolidated RMB RMB RMB thousand thousand thousand thousand Yuan Yuan Note Yuan Yuan (Restated) Item (Restated) (Note 2) (Note 2) 1. Cash flow from operating activities Cash received from sale of goods or rendering of services 4,191,050 4,118,730 1,709,662 1,641,357 Refund of tax and levies - 22,840 - - Other cash received relating to operating activities 362,287 477,995 373,100 564,452 Subtotal of cash inflows from operating activities 4,553,337 4,619,565 2,082,762 2,205,809 Cash paid for goods and services (4,008,007) (4,528,794) (2,064,024) (2,074,518) Cash paid to and on behalf of employees (149,903) (102,092) (89,100) (73,060) Payments of all types of taxes (152,887) (84,097) (19,071) (5,327) Other cash paid relating to operating VII activities (33) (39,870) (35,776) (12,590) (227,126) Subtotal of cash outflows from operating activities (4,350,667) (4,750,759) (2,184,785) (2,380,031) Net cash flows from operating VII activities (33) 202,670 (131,194) (102,023) (174,222) 2. Cash flow from investing activities Cash received from disposal of investments - 2,400 - - Cash received from returns on investments - 1,394 19,742 - Net cash received from disposal of fixed assets, intangible assets & other long-term assets 2,355 2,395 208 2,032 Other cash received relating to investing activities 484 776 61,046 - Subtotal of cash inflows from investing activities 2,839 6,965 80,996 2,032 Cash paid to acquire fixed assets, intangible assets & other long-term assets (81,394) (122,627) (26,813) (18,502) Cash paid to acquire investments (73,460) - (41,200) - Other cash payments relating to investing activities - - (489,831) - Subtotal of cash outflows from investing activities (154,854) (122,627) (557,844) (18,502) Net cash flows from investing activities (152,015) (115,662) (476,848) (16,470) 3. Cash flow from financing activities Cash received from capital contribution - 31,309 - - - 15 - SHENZHEN NANSHAN POWER CO., LTD Notes to the Financial Statements 2007 Where: cash received by subsidiaries from capital contribution of minority shareholders - 31,309 - - Cash received from borrowings 3,827,905 3,259,178 1,572,515 745,947 Other cash received relating to financing activities 139,652 - - - Subtotal of cash inflows from financing activities 3,967,557 3,290,487 1,572,515 745,947 Cash repayments of amounts borrowed (4,063,210) (2,568,538) (1,176,857) (300,947) Cash payments for interest expenses and distribution of dividends or profit (160,942) (158,637) (38,064) (22,034) Where: cash payments for dividends or profits to minority shareholders made by subsidiaries - (13,162) - - Other cash payments relating to financing activities (133,082) - - - Subtotal of cash outflows from financing activities (4,357,234) (2,727,175) (1,214,921) (322,981) Net cash flows from financing activities (389,677) 563,312 357,594 422,966 4. Effect of foreign exchange rate changes on cash and cash equivalents 1,598 (469) - (690) 5. Net (decrease)/increase in cash and VII cash equivalents (33) (337,424) 315,987 (221,277) 231,584 Plus: balance of cash and cash equivalents at the beginning of the VII year (33) 623,514 307,527 347,051 115,467 6. Balance of cash and cash VII equivalents at the end of the year (33) 286,090 623,514 125,774 347,051 The notes to the financial statement are the integral part of the financial statements. Legal representative: Person in charge of accounting: Person in charge of accounting Department: - 16 - SHENZHEN NANSHAN POWER CO., LTD Notes to the Financial Statements 2007 Shenzhen Nanshan Power Co., Ltd Consolidated Statement of Changes in Equity 2007 Shareholders’ equity attributable to parent company Translat ion differen ce in foreign currenc Total Undistr y Minorit shareho Capital Capital Surplus ibuted stateme y lders’ stock reserve reserve profit nts equity equity RMB RMB RMB RMB RMB RMB RMB Item Note thousan thousan thousan thousan thousan thousan thousan d Yuan d Yuan d Yuan d Yuan d Yuan d Yuan d Yuan 547,96 343,72 410,15 223,53 1,525,3 Balance at December 31 2005 6 1 2 4 - - 73 First time adoption of Accounting (100,56 100,56 172,89 172,89 Standards for Business Enterprises XIV - 1,398 0) 0 (1,398) 8 8 547,96 309,59 324,09 172,89 1,698,2 Balance at January 1 2006 6 345,119 2 4 (1,398) 8 71 Increase or decrease of 2006 Net profit - - - 63,133 - (5,841) 57,292 Gains directly counted as shareholders’ equity Others - - - - (1,682) - (1,682) Shareholders’ contribution Capital contribution of shareholders - - - - - 31,309 31,309 Acquire the control rights over original affiliated company and count it into consolidation range - - - - - 22,350 22,350 Profit distribution VII (10,722 Withdrawal of surplus reserve (22) - - 10,722 ) - - - (13,162 (13,162 Distribution for shareholders - - - - - ) ) 547,96 320,31 376,50 207,55 1,794,3 Balance at December 31 2006 6 345,119 4 5 (3,080) 4 78 547,96 320,31 376,50 207,55 1,794,3 Balance at January 1 2007 6 345,119 4 5 (3,080) 4 78 Increase or decrease of 2007 (20,540 Net profit - - - 118,086 - ) 97,546 Gains directly counted as shareholders’ equity - 17 - SHENZHEN NANSHAN POWER CO., LTD Notes to the Financial Statements 2007 Purchasing of subsidiaries - - - - - 29,688 29,688 (75,511 (57,000 Purchasing of minority equity IX(2) - 18,511 - - - ) ) Others - - - - 1,598 - 1,598 Profit distribution VII (12,595 Withdrawal of surplus reserve (22) - - 12,595 ) - - - Distribution for shareholders - - - - - - - 547,96 363,63 332,90 481,99 141,19 1,866,2 Balance at December 31 2007 6 0 9 6 (1,482) 1 10 The notes to the financial statement are the integral part of the financial statements. Legal representative: Person in charge of accounting: Person in charge of accounting Department: - 18 - SHENZHEN NANSHAN POWER CO., LTD Notes to the Financial Statements 2007 Shenzhen Nanshan Power Co., Ltd Statement of Changes in Equity of Parent Company 2007 Total of Undistrib sharehol Capital Capital Surplus uted ders’ stock reserve reserve profit equity RMB RMB RMB RMB RMB Item Note thousand thousand thousand thousand thousand Yuan Yuan Yuan Yuan Yuan 1,573,76 Balance at December 31 2005 547,966 287,371 342,052 396,373 2 First time adoption of Accounting Standards (296,569 (327,631 for Business Enterprises - 1,398 (32,460) ) ) 1,246,13 Balance at January 1 2006 547,966 288,769 309,592 99,804 1 Increase or decrease of 2006 Net profit - - - 107,219 107,219 Gains directly counted as shareholders’ equity Presentation of investment cost through cost method after acquiring the control rights over original affiliated company and counting it into consolidation range - - - 4,421 4,421 Profit distribution VII Withdrawal of surplus reserve (22) - - 10,722 (10,722) - 1,357,77 Balance at December 31 2006 547,966 288,769 320,314 200,722 1 1,357,77 Balance at January 1 2007 547,966 288,769 320,314 200,722 1 Increase or decrease of 2007 Net profit - - - 125,948 125,948 Profit distribution VII Withdrawal of surplus reserve (22) - - 12,595 (12,595) - Distribution for shareholders - - - - - 1,483,71 Balance at December 31 2007 547,966 288,769 332,909 314,075 9 The notes to the financial statement are the integral part of the financial statements. Legal representative: Person in charge of accounting: Person in charge of accounting Department: - 19 - SHENZHEN NANSHAN POWER CO., LTD Notes to the Financial Statements 2007 I. Company Profile Shenzhen Nanshan Power Co., Ltd. (Hereafter referred to as “the Company”) was reorganized to be a joint-stock enterprise from a foreign-invested enterprise under the approval of General Office of the People's Government of Shenzhen by issuing the SFBF [1993] No.897 Document. Registered address of the Company is 18 Yueliangwan Avenue, Nanshan District, Shenzhen, Guangdong Province, PRC. Shenzhen Energy Group Co., Ltd. (hereafter referred to as “the Energy Group”) was the biggest shareholder holding 26.08% shares in the company on Dec 31, 2007. When the Company was reorganized, its total capital stock was RMB103 million Yuan, face value of 1 Yuan for each share. Under the approval of Shenzhen Securities Management Office by issuing SZBF [1993] No.179 Document in 1994, the Company issued 40 million RMB ordinary shares and domestic listed foreign-capital shares respectively to foreign and domestic investors and began the listing exchange in Shenzhen Stock Exchange respectively on July 1, and Nov. 28,1994. Total capital stock after this issue increased to RMB180 million Yuan. In June 1995, the Company implemented such a dividend policy as distributing 1 share to every 10 shares, allotting RMB2.39 Yuan to every 10 initiator's shares and 10 directional corporation shares and 10 A-share public shares, allotting RMB0.5 Yuan to every 10 domestic listed foreign-capital shares. After this policy was implemented, capital stock of the Company was increased by RMB18 million Yuan. On Dec. 1st, 1997, the Company implemented a policy to expanding capital stocks from converting public reserve funds, i.e. converting to increase 8 shares to every 10 shares of all shareholders. After this policy was completed, capital stock of the Company was increased by RMB158.4 million Yuan. On March 27th, 2001, the company implemented an allotment policy, i.e. allotting 3 shares to every 10 shares. There were 13.366 million shares are allotted this time of which shareholders of state-owned shares and corporate shares subscribed 32.68 million shares, shareholders of social public shares subscribed 10.098 million shares and all shareholders of domestic listed foreign-owned shares waived. After this allotment, capital stock of the Company was increased by RMB13.366 million Yuan. On May 10th, 2001, the Company implemented the policy of distribution of bonus and dividend and conversion of public reserve funds to increase capital stock. Based on the total capital stock of 356.4 million shares on Dec. 31st, 2000, 2.5 shares were distributed and 2.5 shares of public reserve funds were converted to every 10 shares. After this policy was completed, capital stock of the Company was increased by RMB178.2 million Yuan. - 20 - SHENZHEN NANSHAN POWER CO., LTD Notes to the Financial Statements 2007 Through the above modifications of shares, the total capital stock of the Company was RMB547.966 million Yuan. According to Approval on Relevant Issues on Allotment and Reform of Equity in Shenzhen Nanshan Thermo-electric Co., Ltd., GZCQ [2006] No.230 Document issued by the State-owned Assets Supervision and Regulation Commission of the State Council, the Company carried out the allotment and reform of equity on March 20th, 2006. All shareholders of non-tradable shares of the Company paid 2.3474 consideration shares and RMB4.1522 Yuan cash as considerations, totally approximate 15.222 million corporate shares and RMB26.925 million Yuan, for every 10 shares of shareholders holding RMB ordinary current shares registered on Feb 17, 2006, the registered date of shares modification agreed in the policy of allotment and reform of equity. From March 28, 2006, all shares of the Company acquired the current listing right in Shenzhen Stock Exchange. However, as the agreed conditions for limited sales, 229.584 million shares held by the former shareholders of non-tradable shares had been unavailable for circulation yet till Dec. 31st, 2007. The Company and subsidiaries (hereafter referred to as “the Group” collectively) are mainly engaged in production of domestic power and thermal energy, construction of power plant, fuel trade and other business concerned. In Sep. 2007, the Company acquired the 75% of equities of Zhongshan Power Development Co., Ltd. (the Power Development), and an unrelated company, respectively holding in the Zhongshan Power Plant Co., Ltd. (Zhongshan Power Plant) and in the Zhongshan Zhongfa Power Co., Ltd. (Zhongfa Power). Please see Note IX (1) for information related to the above acquisition. In Dec. 2007, Hong Kong Syndisome Co., Ltd. (Syndisome), a wholly-owned subsidiary of the Company respectively acquired the 40% shares of Shenzhen Nanshan Electric Burning Machine Engineering Technology Co., Ltd. subordinate to Nangang Power (Hong Kong) Co., Ltd. (Nangang Power) and 15% shares of Shenzhen Nanshan (Dongguan) Power Station Weimei Co., Ltd subordinate to Xinyuan Co., Ltd. (Xinyuan Company). Please see Note Ⅸ (2) for the information related to the above exchange. This financial statement is approved and issued by the board of directors of the Company on April 15, 2008. II. Background for Compilation of Financial Statement Originally, the Group compiled the financial statement in accordance with the Accounting Standards for Business Enterprises announced before Feb. 15th, 2006 and the Accounting - 21 - SHENZHEN NANSHAN POWER CO., LTD Notes to the Financial Statements 2007 System for Business Enterprises published on Dec. 29, 2000 and regulation concerned (hereafter referred to as the Former Accounting Standards and Systems”). From Jan. 1, 207, the Group executed the Accounting Standards for Enterprises – Basic Standards announced by the Ministry of Finance on Feb 15, 2006, 38 Specific Accounting Standards, later announced guide for application of accounting standards, interpretations of accounting standards and other regulations related (hereafter referred to as the Accounting Standards for Business Enterprises”). The financial statement in 2007 was the first annual statement in accordance with the Accounting Standards for Business Enterprises. The Group is A-shares and B-shares listed company an it originally compiled the financial statements respectively in accordance with China former accounting standards and systems and Hong Kong Standards for Financial Report and provided the statements to the public. At the first time for implementing the Accounting Standards for Business Enterprises in Jan. 1, 2007, besides the retroactive adjustments in compliance with Article 5-19 in Accounting Standard for Business Enterprises No. 38 - First time adoption of. Accounting Standards for Business Enterprises, the Group adjusted retroactively the financial statement of 2006 in accordance with the Interpretation No.1 to the Accounting Standards for Enterprises and the difference between accounting policies respectively determined the former and current accounting standards and systems for business enterprises. The data in the financial statement of 2006 had been re-listed after this retroactive adjustment, including: (1) Long term equity investment in subsidiaries was retroacted in the financial statement of parent company and deemed to adopt the cost accounting method initially. (2) Any subsidiary in which the equity of non-continuous operation owners was negative was retroacted in the consolidated statements and consolidated in the consolidated statement of 2006. The consolidated equity of shareholders at the beginning and end of 2006 and the consolidated net profits of 2006 listed according to the former accounting standards and systems were retroacted to be consolidated shareholders equity and net profits in accordance with the Accounting Standards for Business Enterprises. Process of amount adjustment was listed in Note XIV of this financial statement. On Dec. 31, 2007, the current liabilities were RMB2.034634 billion Yuan more than the current assets. Net current liabilities occurred as a part of capital expenditures of the Group, mainly for mechanical equipments, was financed by short term loan. The Group had not met the difficulty in cash flow upon the due renewal of loan. On Dec. 31, 2007, the Group has the authorized credits of RMB2.56491 billion Yuan in the bank, capable of meeting the requirements of liabilities and capitals. Based on such a financial arrangement, the board of directors in the Company had no problems in continuing operations. Therefore, the directors compiled this annual financial statement based on the continuing operation. - 22 - SHENZHEN NANSHAN POWER CO., LTD Notes to the Financial Statements 2007 Ⅲ. Declaration of Compliance with the Accounting Standards for Business enterprises Consolidated financial statement and the financial statement of parent company in 2007 of the Group and the Company met the requirements of the Accounting Standards for Business Enterprises, faithfully and completely showing the financial state of the Group an the Company on Dec. 31, 2007 and the business results, cash flow and other information in 2007. Ⅳ. Key Accounting Policies and Estimate (1) Accounting year The accounting year is from Jan. 1st to Dec. 31st. (2) Recording currency Recording currency is RMB. (3) Foreign currency translation (a) Foreign currency translation Foreign currency exchange is to translate foreign currency into RMB account as per the spot rate on the exchange date. On the date of balance sheet, the foreign currency monetary items are to be translated into RMB as per the spot rate on the exchange date. The translation difference occurred is directly accounted into the current profits and losses with the exception that the exchange difference occurred in special foreign currency loan used for acquiring or producing the assets meeting the conditions of capitalization is treated in the principle of capitalization. Foreign currency non-monetary items that are calculated by historical cost are translated on the date of balance sheet as per the spot rate on the exchange date. (b) Translation of foreign currency financial statement Assets and liabilities items in the balance sheet of overseas business operation are translated as per the spot rate on the date of balance sheet. But for the undistributed profit items in the shareholders equity, other items are translated as per the spot rate when profit occurs. Income and expense items in the profit statement of overseas business operation are translated as per the spot rate on the date of exchange. The translation difference of foreign currency statement occurred in the translation are listed as individual item in shareholder equity. - 23 - SHENZHEN NANSHAN POWER CO., LTD Notes to the Financial Statements 2007 Foreign currency cash flow and cash flow in the overseas subsidiaries are translated as per the spot rate on the date of cash flow. The influence amount of exchange rate fluctuation on cash is listed individually in the cash flow statement. (4) Cash and cash equivalents Cash listed in the cash flow statement means the cash on hand and deposits payable at any time; cash equivalents mean the investment with short term, strong flowability, easy to convert the known cash amount and low risk against value changes. (5) Financial assets Classification of financial assets at initial recognition is: financial asset at fair value through profit or loss, receivables, financial assets available for sale, and held-to-maturity investment. Financial assets are classified relying upon the intension and capability held of the Group on financial assets. During the accounting year, the Group held accounts receivable. (a) Receivables Receivables the non-derivative financial assets for which there is no quoted price in the active market and that recoverable amount is fixed or determinable, including receivable and other receivables (Note Ⅳ (6)). Receivables adopt effective interest method and are measured amortized cost. (b) Conformation and measurement Financial assets were confirmed as per fair value in balance sheet when the Group became one party of financial instrument contract. Exchange expense related to receivables was accounted into the amount of initial recognition. When the right of certain financial asset to charge the cash flow terminates, or almost all risks and payments on ownership of the financial asset have been transferred to the carrying party, conformation on this financial asset should be terminated. (c) Impairment of financial assets The Group examines the book value of financial assets on the date of balance sheet and provision for impairment should be made on any impairment that is proved objectively may occur on certain financial asset. Provision for impairment should be made on any financial asset measured by amortized - 24 - SHENZHEN NANSHAN POWER CO., LTD Notes to the Financial Statements 2007 cost as per the difference that the present value of future cash flow (excluding the loss of future credits not yet occurred) lowers than book value. It is objectively related to the events that occur after such loss is recognized, and the impairment-related losses as originally recognized shall be reversed and be recorded into the profits and losses of the current period. (6) Receivables Accounts receivable include accounts receivable and others. The accounts receivable produced by selling products to the public or providing labor services of the Group take the fair value of contract or agreement price receivable from the purchaser as amount of initial recognition. The receivables, adopting actual interest rate method, are listed by the net of amortized cost less the provision for bad debt. An impairment test and provisions for bad debt shall be made on the receivables with significant single amounts if any objective evidence shows that the Group is unable to recover all accounts as per the former articles according to the difference that the present value of future cash flow (excluding the loss of future credits not yet occurred) lowers than book value. The financial assets with insignificant single amounts together with the unimpaired receivables after individual test shall be included in several combinations by credit risk features. Based on actual loss rate of any receivable combination with same or similar risk features as previous years and considering the current condition, provision for bad debt in this year shall be determined. (7) Inventories Inventories include fuel, spare articles and parts, auxiliary material and low-value consumable article and are listed by cost or net realizable value, whichever is lower. Cost of inventories at delivery is accounted by method of weighted mean, while fuel or service or maintenance cost inventories under consumption shall be included depending on the conditions. Provisions for decline in value of inventory shall be made according to the difference that cost is higher than the net realizable value, while the net realizable value is determined by the estimated sale price of inventories less the estimated sales expense and taxes concerned in the daily activities. Inventory system of the Group adopts perpetual inventory system. - 25 - SHENZHEN NANSHAN POWER CO., LTD Notes to the Financial Statements 2007 (8) Long term equity investment Long term equity investment includes the equity investment of the Company in its subsidiaries and equity investment of the Group in joint ownership enterprises. (a) Subsidiary Subsidiary means the invested company in which the Group has right to determine the financial and business policies and acquires profits from the business activities. The current convertible company bonds, current exercisable warrant and other potential voting rights should be taken into account in determining if an invested entity can be controlled. Investment in subsidiaries is listed as the amount determined by cost method in the individual financial statement of the Company and consolidated after adjustment by equity method in compiling the consolidated financial statement. Long term equity investment adopting cost accounting method is measured by initial investment cost. The allotted cash dividend or profit announced by invested entity is recognized as the current investment return. The investment income recognized by the investing enterprise shall be limited to the amount received from the accumulative net profits that arise after the invested entity has accepted the investment. Where the amount of profits or cash dividends exceeds the aforesaid amount, it shall be regarded as recovery of initial investment cost. (b) Jointly-run enterprise Jointly-run enterprise means the invested entity for which the Group has significant influence on its financial and business decisions. The initial measurement of investment in the jointly-run enterprise shall be made as per actual cost by adopting the equity method for subsequent measurement. If the initial cost is more than the attributable share of the fair value of the invested entity's identifiable net assets for the investment, the difference shall be included in the initial cost; if the initial cost is less than the attributable share of the fair value of the invested entity’s identifiable net assets for the investment, the difference shall be included in the current profits and losses and the cost of the long-term equity investment shall be adjusted simultaneously. The Group recognizes the current investment equity according to the enjoyed or undertaken net equity share of invested entity while equity method is employed. The Group shall recognize the net losses of the invested enterprise until the book value of the long-term equity investment and other long-term rights and interests which substantially - 26 - SHENZHEN NANSHAN POWER CO., LTD Notes to the Financial Statements 2007 form the net investment made to the invested entity are reduced to zero, but the Group bears the obligation to undertake extra losses and continue to recognize the investment loss and expected liabilities where the recognition conditions for expected liabilities meet the rules of contingencies. Where any change is made to the shareholders equity other than the net profits and losses of the invested entity, the book value of the long-term equity investment shall be adjusted and be included in the shareholders equity. The Group shall, in the light of the profits or cash dividends declared to distribute by the invested entity, calculate the proportion it shall obtain, and shall reduce the book value of the long-term equity investment correspondingly. Internal exchange equity occurred between the Group and the invested entities, according to the shareholding proportion, belonging to the Group shall be counteracted and the investment equity should be recognized on such a basis. Internal exchange equity occurred between the Group and the invested entities belonging to the impairment of assets shall be recognized in sum and the corresponding unrealized equity shall not be counteracted. (c) Other long term equity investment A long-term equity investment for which Group does not control, jointly control or does not have significant influences on the invested entity and that has no offer in the active market and its fair value cannot be reliably measured adopts the cost accounting method. (d) Impairment of long term equity investment Where the recoverable amount of a long term equity investment is less than its book value, its book value shall be recorded as recoverable amount (Note Ⅳ (14)). (9) Fixed assets Fixed assets include houses and buildings, mechanical equipments, transport tools and other equipments. The initial measurement of purchased or newly-built fixed assets shall be made as per their actual cost. The subsequent expenses related to a fixed asset for which the pertinent economic benefits are likely to flow into the enterprise and the cost can be measured reliably can be accounted into cost of the fixed assets; the book value of substituted part shall be terminated the confirmation; all other subsequent expenses shall be accounted the current profits and losses upon the occurrence. The depreciation of gas turbine set in the mechanical equipments adopts work load method according to the percentage of actual power generation hours in total expected power generation hours after the face value less the expected net salvage value. The expected net salvage value rate of gas turbine set is 10%. - 27 - SHENZHEN NANSHAN POWER CO., LTD Notes to the Financial Statements 2007 With exception of the gas turbine set, the depreciation of fixed assets adopts straight-line method that is depreciated as per the book value less the expected net salvage value within the expected service life. For fixed assets that provision for decline in the value of fixed asset has been made, the depreciation shall be determined by the book value less the provision for decline in the value of fixed asset and the expected remaining service life. The expected service life, expected net salvage value rate and annual depreciation rate of fixed assets other than gas turbine set are listed as follows: Expected service Expected net salvage Yearly depreciation life value ratio House and buildings 20 years 10% 4.5% Machinery equipment 10years 10% 9% Transportation facilities 5-10 years 10% 9%-18% Other equipments 5 years 10% 18% Check and adjust the expected total electricity generation hours of the gas turbine generator unit, expected service life of fixed assets excluding gas turbine generator unit, expected net salvage value and method of depreciation at the end of every year. When the recoverable amount of fixed assets is lower than its book value, calculate the book value as the recoverable amount note (IV (14)). For the fixed assets for sales, show with the lower amount of book value and fair value subtracting treatment expenses. As for the amount lower than former book value of fair value subtracting treatment expenses, determine as assets impairment loss. When the fixed assets are disposed, or can not make economic benefits after expected use or treatment, stop to verify the fixed assets. Calculate the treatment income of sales, transfer, reject or damage of fixed assets after deducting its book value and relevant tax into profits and losses of the current period. (10) Project under construction Measure the project under construction as per actual incurred cost. The actual cost includes construction cost, necessary expenditure for reaching agreed serviceable condition and loans satisfying capitalization conditions incurred before it reaches serviceable condition s. - 28 - SHENZHEN NANSHAN POWER CO., LTD Notes to the Financial Statements 2007 When the project under construction reaches to agreed serviceable condition, turn it into fixed assets and calculate depreciation from the next month. When the recoverable amount of project under construction is lower than the book value, calculate the book value as recoverable amount (note IV (14)). (11) Intangible assets The Intangible assets include land use right, project priority benefit and software license, etc, measuring as actual cost. (a) Land use right The land use right is averagely amortized as per the service life of 20 years to 70 years. As for the cost of outsourcing land and building difficult to rationally distribute between land use right and building, take as fixed assets. (b) Project priority benefit The project priority benefit is averagely amortized as per the contract agreed period of 5 years. - 29 - SHENZHEN NANSHAN POWER CO., LTD Notes to the Financial Statements 2007 (c) Software license The software license is amortized averagely as per the expected life of 5 years. (d) Intangible assets depreciation When the recoverable amount of the assets is lower than its book value, write down the book value as recoverable amount (notes IV (14)). (e) Periodically check service life and amortization methods Check and adjust the expected life and its amortization methods of intangible assets with limited service life at the end of the year. (12) Goodwill The goodwill is the balance of fair value share gotten by equity investment cost exceeding enjoyed invested unit in investment acquisition day, or the balance of fair value share of the cost of enterprise combination not under same control exceeding the buyer’s identifiable net assets obtained on the purchase date. The goodwill formed by enterprise combination should be separately listed on the financial statement. When the investment cost of purchasing equity of joint venture exceeds the investment, it shall enjoy the balance of fair value share of invested unit, including long-term equity investment. The goodwill formed by enterprise combination should be made impairment test annually at least. When making impairment test, the book value of goodwill is apportioned to beneficial assets group or combination of assets group as per the synergistic effect of enterprise combination. The impairment of assets group or combination of assets group is shown in notes IV (14). The goodwill at the end of period is shown as the net amount of cost subtracting accumulated impairment loss. (13) Long-term deferred expenses The long-term deferred expenses includes the expenditures incurred in major repair and improvement of the rented fixed assets, which is amortized averagely as per expected benefit period in instalments, and shown as the net amount of actual expenditure subtracting accumulated amortization. - 30 - SHENZHEN NANSHAN POWER CO., LTD Notes to the Financial Statements 2007 (14) Impairment of assets No matter whether there is any sign of possible assets impairment, the goodwill separately listed in the financial statement shall be subject to impairment test every year at least once. Make impairment test for the fixed assets, project under construction, intangible assets and long-term equity investment, which exists possible assets impairment. If the test shows the redeemable amount is lower than book value, set up the provision for impairment as per the balance and number in the impairment loss. The recoverable amount is the higher one of net value of fair value of assets subtracting disposal expense or the future cash flow expected by assets. The fixed assets depreciation reserves is calculated and affirmed based on single item assets, if the recoverable amount on single item assets is difficult to estimate, determine as assets group it belongs. The assets group is minimum assets combination producing separately cash inflow. Once determining the above assets impairment shall not be returned if the value recovers in the future periods. (15) Borrowing costs As for the borrowing costs that can be directly assigned to construction fixed assets that only can reach expected service state after quite long activities of construction, capitalize and number in the cost of the assets when the assets expenditure and borrowing cost has incurred and the necessary construction activities needed for reaching scheduled serviceable condition of assets. Stop capitalization when the constructed assets reach to scheduled serviceable condition, and the borrowing costs incurred thereafter shall be recorded in current profits and losses. Where the construction of an asset is interrupted abnormally and the interruption period lasts for more than 3 months, the capitalization of the borrowing costs shall be suspended until the restart of construction of assets. As for specifically borrowed loans for the acquisition and construction or production of assets eligible for capitalization, the to-be-capitalized amount of interests shall be determined in light of the actual cost incurred of the specially borrowed. Where a general borrowing is used for the construction or production of assets eligible for capitalization, calculate and determine the to-be-capitalized amount of interests on the general borrowing by multiplying the weighted average asset disbursement of the part of the accumulative asset disbursements minus the general borrowing by the capitalization rate of the general borrowing used. The capitalization rate shall be calculated and determined in light of the weighted average interest rate of the general borrowing, while the capitalized amount not exceeds the interest range actually incurred of relevant borrowing in current period. (16) Loan - 31 - SHENZHEN NANSHAN POWER CO., LTD Notes to the Financial Statements 2007 The loan deducting transaction cost as per fair value shall be subject to initial measurement, and make subsequent measurement as per the amortized cost adopting effective interest method. The loan paying in 12 months (including 12 months) from balance sheet date is short-term loan, and others are long-term loan. - 32 - SHENZHEN NANSHAN POWER CO., LTD Notes to the Financial Statements 2007 (17) Employee compensation The employee compensation mainly includes expenditures relevant to obtain services offered by employee, such as salary, bonus, allowance and subsidy, welfare expense, social insurance charges, housing accumulation fund and labour-union expenditure, etc. Determine payable compensation during the period of employee offering services, and charge against relevant asset cost and expenditure according to the beneficial objective of services employee offered. (18) Asset of deferred income tax and liability of deferred income tax Calculate and determine the asset of deferred income tax and liability of deferred income tax as per the balance (temporary differences) of tax basis of asset and liability and its book value. As for the deductible loss that can be carried out forward to the next year as per the stipulations of tax law, the corresponding deferred income tax assets shall be determined as the temporary differences. As for the temporary differences produced by initial recognition, the corresponding deferred income tax liability shall be not determined. As for the temporary differences produced by initial recognition of assets or liabilities produced in the non-enterprise combination which not only influences accounting profit, but also influences taxable income (or deductible loss), the corresponding deferred income tax assets and liabilities shall not be determined. On balance sheet date, deferred income tax assets and liabilities shall be measured at the tax rate applicable to the period which the assets are expected to be recovered or the liabilities are expected to be settled. The group shall recognize the deferred income tax assets to the extent of the amount of deductible temporary difference, deductible loss and tax deduction which are most likely to obtain and which can be deducted from the deductible temporary difference. Recognize the deferred income tax assets and liability arising from temporary difference related to the investments of companies and subsidiary companies. As for the temporary difference the group can control the reversed time and not likely to be reversed in the expected future, do not recognize. (19) Recognition of income Recognize the amount of income as per the fair value of received or receivable contract or agreement when the group selling products and commodity and rendering service in the daily operating activities. The income is shown as per the net amount deducting value added tax. - 33 - SHENZHEN NANSHAN POWER CO., LTD Notes to the Financial Statements 2007 Recognize corresponding income for the economic benefits relevant to transaction which can flow into the group, relevant income can be measured reliably and satisfy the special income recognition standard of following operating activities. - 34 - SHENZHEN NANSHAN POWER CO., LTD Notes to the Financial Statements 2007 (a) Selling products and commodities Recognize the income of power selling when it is transferred to Shenzhen Power Supply Bureau of Guangdong Power Grid Co. and Transmission Center of Guangdong Power Grid Co. Recognize income of thermal selling when transferring the vapor to customer. After transporting the fuel to agreed delivery place as per stipulations of agreement, the income of fuel selling shall be recognized by purchaser after acceptance. (b) Rendering of service This group renders service outside and recognizes income as per percentage of completion. The group recognizes finishing schedule as per the percentage of incurred cost to expected total cost. (c) Abalienating right to use assets Calculate and recognize the interest income basis on time proportion adopting actual interest rate. (20) Government subsidies The government subsidies shall be recognized when the group satisfies all conditions it attached and can be accepted. If the government subsidies are monetary assets, measure as per the amount actually received; for the subsidies appropriating as per fixed quota standard, measure as per receivable amount; for government subsidies are not monetary assets, measure as fair value; for the fair value can not get reliably, measure as per nominal amount and record into profits and losses of the current period. Recognize the government subsidies relevant to assets as deferred income, averagely distribute in the expected service life of relevant assets, and record into profits and losses of the current period. If the government subsidies relevant to income used to compensate relevant cost or loss in the enterprise’s future, recognize it as deferred income, and record into profits and losses of the current period during the period of recognizing relevant costs; for that used to compensate relevant costs or loss happed, record directly into profits and losses of the current period. (21) Lease The lease actually transfers all risks and reward relevant to ownership of financial asset is financial lease. Other leases are operating lease. - 35 - SHENZHEN NANSHAN POWER CO., LTD Notes to the Financial Statements 2007 The rent of operating lease shall be recorded into relevant asset cost or profits and losses of the current period according to straight-line method during the lease term. - 36 - SHENZHEN NANSHAN POWER CO., LTD Notes to the Financial Statements 2007 (22) Dividend distribution Recognize the cash dividends on current period approved by general meeting of shareholders as liabilities. (23) Combination of enterprise (a) Combination of enterprise under the same control The combination value paid and net assets obtained by combining party shall be measured as book value. For balance of book value of net assets obtained by combining party and book value of combination value paid, adjust capital surplus. If the capital surplus is not enough to reduce, adjust the retained profits. Record the direct relevant expense incurred for combination of enterprise into profits and losses of the current period. (b) Combination of enterprise not under the same control The combination cost of combining party and identifiable net assets obtaining from the combination shall be measured as per the fair value on its purchased date. The difference of combination cost larger than the fair value of identifiable net assets on purchased date obtained by combining party shall be recognized as goodwill; the difference of combination cost larger than the fair value of identifiable net assets on purchased date obtained by combining party shall be recorded into profits and losses of the current period. The direct relevant expenses incurred during combination of enterprise shall be recorded into cost of combination of enterprise. (c) Purchase equity of minority shareholders The long-term equity investment added shall be treated as per the stipulations in note IV (8) “long-term equity investment”. The cost of long-term equity investment added because of purchasing of minority equity shall enjoy the difference of identifiable net assets fair value of subsidiary on trading day calculating as per equity proportion newly obtained, showing in combined balance sheet as goodwill. The cost of long-term equity investment added because of purchasing of minority equity and calculating as per equity proportion newly obtained shall enjoy subsidiaries’ difference of identifiable net assets calculated from purchased date (or combination date), excluding - 37 - SHENZHEN NANSHAN POWER CO., LTD Notes to the Financial Statements 2007 the parts recognized as goodwill, adjust and combine the capital surplus in the balance sheet and adjust the retained income if the balance of capital surplus is insufficient to reduce. - 38 - SHENZHEN NANSHAN POWER CO., LTD Notes to the Financial Statements 2007 (24) Preparing method of combined financial statement The combination range of combined financial statement comprises the company and subsidiary. From the day obtaining actual control power, the group shall begin to combine it; stop to combine from the day loosing actual control power. All major working balance, transaction and unrealized profit in the group shall be offset when preparing combined financial statement. The parts not possessed by parent company in the shareholders’ right of subsidiaries shall be shown as rights of minority shareholders under shareholders’ equity in the combined financial statement. If the accounting policies and accounting periods adopted by the subsidiaries are different from those adopted by the company, an adjustment shall be made to the subsidiaries' financial statement of the company in accordance with the accounting policies and accounting periods of the company when preparing combined financial statement. For the subsidiaries enterprise obtained not under same control, when preparing combined financial statement, adjust its separate financial state basis on fair value of identifiable assets on purchased date; for the subsidiaries enterprise obtained under same control, regard the combination of enterprise had happened at the beginning of period of report period, take its assets, debts, business result and cash flow from the beginning period of report into combined financial statement, and the net profit realized before combination date shall be reflected separately in the combined financial statement. (25) Divisional report Business division refers to the component parts that are diacritical, can supply single or a group relevant products or services, undertaking the risks and rewards different from other component parts. Regional division refers to the component parts that are diacritical, can supply products or services under certain economic environment, undertaking the risks and rewards different from other component parts of supplying products and services under other economic environments. The report form of this group is mainly as business division. All sales of this group and all assets are all from Chinese Mainland, risks and reward of each regional economic environment is similar, so there is no regional division report. The transfer price among divisions is determined as per market price. - 39 - SHENZHEN NANSHAN POWER CO., LTD Notes to the Financial Statements 2007 (26) Determination of fair value of financial instruments For the financial instruments with activated market, determine its fair value as per the quote in activated market. For the financial instruments without activated market, determine its fair value adopting estimation technology. The estimation technology includes reference to familiar conditions and the price used in market transaction by each party voluntarily, and reference to the current fair value and discounted cash flow technique of other financial assets with same nature. When adopting estimation technology, try best to use market parameter to a great extent and reduce to use specific parameters relevant to this group. (27) Important accounting estimate and judgment This group continuously evaluates the adopted important accounting estimate and critical assumption according to historical experience and other factors, including rational expectation of future items. (a) Important accounting estimate and its critical assumption Important accounting estimate and its critical assumption that may cause major adjustment risks on the book value of assets and liabilities of next accounting year are shown as follows: (i) Expected total electricity generation hours of gas turbine As notes IV (9) related, the units-of production depreciation method is adopted for the depreciation of the gas turbine in this group; after subtracting estimated expected net salvage value with its account entered value, measure depreciation as per the actual electricity generation hours to expected electricity generation hours. The total expected electricity generation hour of gas turbine generator unit is formulated referring to the technical standards of generator unit with similar types in the industry and manufacturer. The management layer shall combine with relevant technician to periodically evaluate the total expected electricity generation hour according to the use condition of each gas turbine generator unit. If there is major difference, the total expected electricity generation hour shall be adjusted. The directors of this company consider that the total expected electricity generation hour of gas turbine generator unit of the company is rational. (ii) Fair value measurement of purchasing subsidiaries' identifiable net assets - 40 - SHENZHEN NANSHAN POWER CO., LTD Notes to the Financial Statements 2007 As related in notes IX (1), the company purchased 75% equity of Zhongshan Power Plant and Zhongfa Electric Power respectively in 2007. On the purchase date, the identifiable net assets of Zhongshan Power Plant and Zhongfa Electric Power mainly are land use right. When measuring the fair value of these land use right on purchase date, the company mainly consulted the evaluation result of independent evaluation organs and measured the plot ratio of the land use right may approved from the management layer of relevant authorities. The directors of the company consider that the fair value of the land use right on purchase date the company evaluated is rational. V. Tax Main taxation items and its tax rate applicable in the year of group are shown as follows: Taxation items Tax rate Tax base Business income 15%, 17.5%, 20%, 27% and Taxable income tax 33% Value added tax 13% and 17% Added value of taxable income (the taxable income is calculated by sales amount of taxable income multiply applicable tax rate after deducting the input tax permissible deduction in the current period) Sales tax 3% and 5% Turnover of taxable income The Law of the People’s Republic of China on Enterprise Income Tax ("new income tax low") was approved by National People's Congress on March 16, 2007, which shall come into effect as of January 1, 2008. The company and its subsidiaries, including Shenzhen New Power Industry Co., Ltd (New Power), Engineering Company, Shenzhen Xiefu Fuel Supply Co., Ltd. (Xiefu Fuel Supply) are enterprises established in special economic zone. According to stipulations of relevant tax law of China and approval of local tax authorities, the applicable enterprise income tax rate of above enterprises is 15%. Shenzhen Nanshan Power Station Co., Ltd (Zhongshan) (Shenzhen Nanshen Power (Zhongshan)) and Shenzhen Nanshan Power Station Weimei Co., Ltd. (Dongduan) are foreign-funded enterprises undertaking energy production. According to stipulations of relevant tax law of China and approval of local tax authorities, the applicable enterprise income tax rate of above enterprises is 15%. According to the stipulations of new income tax, the applicable enterprise income tax rate of the company and above subsidiaries shall be transited to 25% in the five years from 2008 to 2012. The applicable enterprise income tax rate of the company and above subsidiaries shall be adjusted from 27% or 33% on Jan. 1, 2008 to 25%. The New Power is appraised and qualified as Advance Technology Enterprise by Shenzhen Trade and Industry Bureau in 2006. According to the [2007]16 documents of SDSSH, the New Power shall enjoy the preference of a fifty percent reduction in three years from 2007 - 41 - SHENZHEN NANSHAN POWER CO., LTD Notes to the Financial Statements 2007 to 2009. The actual enterprise income tax rate of New Power in 2007 is 7.5%. According to the stipulations of new tax law, the lasting of preference above whether is not determined. The engineering company is a foreign funded enterprise undertaking electricity production and relevant business, according to relevant stipulations of Income Tax Law of the People’s Republic of China for Enterprises with Foreign Investment and Foreign Enterprises and relevant approval of local tax authorities, from the first year of profit making year after making up the past accumulated deficit, so it shall be exempted from income tax in the first and the second year, and allowed a fifty percent reduction in the third to fifth years. The first year beginning to make profit is 2004. According to relevant stipulations of new income tax, the above mentioned tax preference of engineering company shall be enjoyed until the tax preference period finished. The enterprise income tax rate of engineering company in 2007 is 7.5%. Enterprise Income Tax rate of the company and its subsidiaries Shennan Energy (Singapore)Pte Ltd and Hong Kong Syndisome Co., Ltd. are respectively 20% and 17.5% in 2007. The applicable business tax rate of engineering consultant service income and leasing business income of this group is 5%. - 42 - SHENZHEN NANSHAN POWER CO., LTD Notes to the Financial Statements 2007 VI Subsidiaries Subsidiaries of combination of enterprise not under same control and obtained through other methods: Equity proportion held by the Vote proportion company of the company Place of regist Registered Business nature and Direc Indirec Indirec ration capital scope t t Direct t Shennan Energy Singa S$ 1,500,000 Agent the gas turbine 100% - 100% - (Singapore)Pte Ltd pore and its spare parts and Sino-foreign joint venture self-use fuel Hong Kong Hong HK$ 200,000 Export and import - 100% - 100% Syndisome Co., Kong trade Ltd. Shenzhen New Power China Technology 75% 25% 75% 25% Industry Co., Ltd development of (New Power) surplus heat utilization, power generation of heat RMB utilization and gas 113,850,000 turbine Shenzhen Nanshan China Power generation of 55% 25% 55% 25% Power Station Co., RMB gas turbine and Ltd (Zhongshan) 396,800,000 heat utilization Shenzhen Nanshan China RMB10,000, Technology 60% 40% 60% 40% Electric Burning 000 consultation of the Machine Engineering construction Technology Co., Ltd. engineering of gas, (notes IX (2)) vapor combined and circulated power plant, and maintenance and overhaul of relevant - 43 - SHENZHEN NANSHAN POWER CO., LTD Notes to the Financial Statements 2007 operating equipments Shenzhen Nanshan China USD Construction and 40% 30% 40% 30% Power Station 35,040,000 operation of natural Weimei Co., Ltd gas power plant (Dongguan) (notes IX (2)) Zhongshan Zhongfa China RMB Produce and 75% - 75% - Power Plant Co., Ltd. 60,000,000 electricity generation (notes IX (1)) Zhongshan Zhongfa China RMB Produce and 75% - 75% - Power Plant Co., Ltd. 177,800,000 electricity generation (notes IX (1)) Shenzhen Xiefu Fuel China RMB Self-operation or 50% - 50% - Supply Co., 53,300,000 agent for export and Ltd.(Note (1)) import of fuel Huidong Xiefu Port China RMB Construction and - 42% - 84% Overall Development 8,620,000 operation of Co., Ltd. (Note (2)) integrated dock and its matching facilities )Huidong Harbour China RMB Construction and - 23% - 55% Development Co., 10,000,000 operation of sundries Ltd. (Note (3)) dock, petroleum product dock (from Guangdong and its matching facilities) Note (1): The Company obtained the control right on finance and operating activities of Xiefu Fuel Supply in 2006. So, it became the subsidiary of this company, and it was brought in the combination range from the date of controlling it. Note (2): 84% equity of Huidong Xiefu Port Overall Development Co., Ltd. (“Huidong Xiefu”) is held by Xiefu Fuel Supply. Note (3): 55% equity of Huidong Harbour Development Co., Ltd. is held by Huidong Xiefu. - 44 - SHENZHEN NANSHAN POWER CO., LTD Notes to the Financial Statements 2007 VII. Notes to the Consolidated Financial Statements (1) Money Capital Dec. 31, 2007 Dec. 31, 2006 RMB, 1 thousand Yuan RMB, 1 thousand Yuan Cash 764 611 Bank Deposit (Note 1) 400,434 622,080 Other Monetary Assets (Note 2) 17,974 823 419,172 623,514 Note 1: Till to December 31, 2007, RMB 115,378, 000 Yuan of the total bank deposit had been used as the mortgage of the short-term borrowings (See Note VII (10)). Note 2: Till to December 31, 2007, other monetary asset mainly referred to RMB 17,704,000 Yuan deposit for drawing notes payable. The money capital included the following foreign currency balance: Dec. 31, 2007 Dec. 31, 2006 Amount of Exchan RMB. Amount of Exchan RMB. foreign ge Rate Converted foreign ge Rate Converted currency into currency into 1 thousand RMB, 1 1 thousand RMB, 1 Yuan thousand thousand Yuan Yuan Dollar 289 7.3046 2,111 69 7.8087 539 Hong Kong Dollar 18,629 0.9364 17,444 116 1.0047 117 Euro 8 10.6669 85 16 10.2665 164 Singapore Dollar 205 5.0518 1,036 805 5.0926 4,100 20,676 4,920 (2) Accounts Receivable and Other Notes Receivable (a) Accounts Receivable Dec. 31, 2006 Dec. 31, 2007 RMB, 1 thousand RMB, 1 thousand Yuan Yuan Accounts Receivable 596,986 630,470 Increasing of Decreasing of current year current year RMB, 1 thousand RMB, 1 thousand Yuan Yuan Minus: bad debt (10,102) (1,024) - (11,126) reserves 586,884 619,344 - 45 - SHENZHEN NANSHAN POWER CO., LTD Notes to the Financial Statements 2007 VII. Notes to the Consolidated Financial Statements (Continued) (2) Accounts Receivable and Other Notes Receivable (Continued) (a) Accounts Receivable (Continued) The corresponding analysis on accounts receivable and bad debt reserves are as follows: Dec. 31, 2007 Dec. 31, 2006 Ratio of Withdra Withdra the Bad debt wal Ratio of Bad debt wal Amount Total reserves Rate Amount the Total reserves Rate RMB, 1 RMB, 1 RMB, 1 RMB, 1 thousand thousand thousand thousand Yuan Yuan Yuan Yuan Within a year 607,435 96% - - 509,207 85% - - One to two years 17,800 3% 6,791 38% 70,562 12% 8,365 12% Two to three years 1,000 - 100 10% 17,070 3% 1,707 10% Over three 4,235 1% 4,235 100% 147 - 30 20% 630,470 100% 11,126 2% 596,986 100% 10,102 2% The analysis on the accounts receivable is made in accordance with their types as follows: Dec. 31, 2007 Dec. 31, 2006 Withdra Withdra Ratio of Bad debt wal Ratio of Bad debt wal Amount the Total reserves Rate Amount the Total reserves Rate RMB, 1 RMB, 1 RMB, 1 RMB, 1 thousand thousand thousand thousand Yuan Yuan Yuan Yuan Significant single amounts 598,534 95% - - 586,371 98% - - Insignificant single amounts with high portfolio risk 4,235 1% 4,235 100% 30 - 30 100% Others 27,701 4% 6,891 25% 10,585 2% 10,072 95% 630,470 100% 11,126 2% 596,986 100% 10,102 2% Till to December 31, 2007, to the accounts receivable, there were no debts of the shareholders who hold over 5% (including 5%) voting rights. - 46 - SHENZHEN NANSHAN POWER CO., LTD Notes to the Financial Statements 2007 The total amount of the debts belonging to the top five debtors was RMB 510,439,000 Yuan, which should be collected at the end of year, accounting for 81% of the total account receivables. And all the account receivable ages were less than one year. The accounts receivable with the age more than one year was primarily the un-recovered fuel sales charge. Reserve provision for bad debts was proposed by the management team after conducting the collection risk. - 47 - SHENZHEN NANSHAN POWER CO., LTD Notes to the Financial Statements 2007 VII. Notes to the Consolidated Financial Statements (Continued) (2) Accounts Receivable and Other Notes Receivable (Continued) (a) Accounts Receivable (Continued) Significant single amounts are mainly the electricity fee receivable and relevant electricity fee subsidies. The above age was primarily one to three months and there is no collection risk. Therefore, the management team did not consider a reserve provision for bad debts was necessary, while the management team considered a reserve provision for bad debts was necessary to the significant single amounts receivable with the age more than one year. The insignificant single amounts with high portfolio risk mainly refer to the account receivable with the age of more than three years, and a full reserve provision for bad debts, because of their longer age and higher collection risk was made to the above single amounts by the management team based on their experience. (b) Other Notes Receivable (Continued) Dec. 31, 2006 Dec. 31, 2007 RMB, 1 thousand RMB, 1 Yuan thousand Yuan Current Amount Receivable from Zhongfa Electricity 32,389 - Fund receivable from Huizhou Dashi Lake Project 14,312 14,312 Bail against litigation receivable from Dongbao Power Plant 14,343 - Current Amount Receivable from Shenzhen Hehe Investment Development Company Ltd. 5,682 5,482 Current Amount Receivable from Nanshan Investment Management Company Ltd. 5,896 5,896 Current Amount Receivable from Zhongshan Guanzhong Investment Company Ltd. - 9,557 Others 35,656 28,975 108,278 64,222 Increase of Dncrease of Current yaar Current year - 48 - SHENZHEN NANSHAN POWER CO., LTD Notes to the Financial Statements 2007 RMB,1 RMB,1Thoudan Thousand yuan yuan Minus: bad debt reserves (26,877) (3,612) _ 81,401 33,724 - 49 - SHENZHEN NANSHAN POWER CO., LTD Notes to the Financial Statements 2007 VII. Notes to the Consolidated Financial Statements (Continued) (2) Accounts Receivable and Other Notes Receivable (Continued) (b) Other Notes Receivable (Continued) The analysis on other accounts receivable and corresponding bad debt reserves are as follows: Dec. 31, 2007 Dec. 31, 2006 Withdra Withdra Ratio of Bad debt w Ratio of Bad debt w Amount the Total reserves Rate Amount the Total reserves Rate RMB, 1 RMB, 1 RMB, 1 RMB, 1 thousand thousand thousand thousand Yuan Yuan Yuan Yuan Within a year 25,979 40% - - 50,016 46% - - One to two years 526 1% 26 5% 20,274 19% 1,014 5% Two to three years 70 - 7 10% 8,724 8% 3,330 38% Over three 37,647 59% 30,465 81% 29,264 27% 22,533 77% 64,222 100% 30,498 47% 108,278 100% 26,877 25% The analysis on other accounts receivable is made in accordance with their types as follows: Dec. 31, 2007 Dec. 31, 2006 Withdra Withdra Ratio of Bad debt w Ratio of Bad debt w Amount the Total reserves Rate Amount the Total reserves Rate RMB, 1 RMB, 1 RMB, 1 RMB, 1 thousand thousand thousand thousand Yuan Yuan Yuan Yuan Significant single amounts 23,869 37% 14,312 60% 61,042 56% 14,312 23% Insignificant single amounts with high portfolio risk 12,874 20% 12,874 100% 7,392 7% 7,392 100% - 50 - SHENZHEN NANSHAN POWER CO., LTD Notes to the Financial Statements 2007 Others 27,479 43% 3,312 12% 39,844 37% 5,173 13% 64,222 100% 30,498 47% 108,278 100% 26,877 25% In the other accounts receivable, there were no debts of the shareholders who hold over 5% (including 5%) voting rights. The total amount of the debts belonging to the top five debtors is RMB 35,710,000 Yuan, which should be collected at the end of year, accounting for56% of the total account receivables, and of which, the age of the account receivable over one year is RMB 25,690,000 Yuan. And the bad debt reserve is RMB 20,208,000 Yuan. No significant foreign currency balance existed in other account receivable. - 51 - SHENZHEN NANSHAN POWER CO., LTD Notes to the Financial Statements 2007 VII. Notes to the Consolidated Financial Statements (Continued) (2) Accounts Receivable and Other Notes Receivable (Continued) (b) Other Notes Receivable (Continued) Significant single amounts primarily included the account receivable of Huizhou Dashi Lake development project. Because its age had been more than three years, a full provision for bad debt, by adopting the method of specific cost identification, had been made by the management team based on their experience and the analysis & review on the project. And other account receivables were mainly the electricity fee receivable and current account between Zhongshan Guanzhong Investment Co., Ltd., and the age of the above account receivable was within a year. Therefore, the management team did not consider a reserve provision for bad debts was necessary because of no collection risk based on the nature of account, experience and analysis & review on the debtor. The insignificant single amounts with high portfolio risk mainly refer to the account receivable with the age of more than three years, and a full reserve provision for bad debts, because of their higher collection risk was made to the above single amounts by the management team based on their experience. (3) Advance Payment Dec. 31, 2007 Dec. 31, 2006 Age Amount Ratio of the Amount Ratio of the Total Total RMB, 1 thousand RMB, 1 thousand Yuan Yuan Within a year 32,984 96% 43,208 99% Over a year 1,358 4% 410 1% 34,342 100% 43,618 100% In the advance payment, there were no debts of the shareholders who hold over 5% (including 5%) voting rights. No significant foreign currency balance existed in the advance payment. - 52 - SHENZHEN NANSHAN POWER CO., LTD Notes to the Financial Statements 2007 VII. Notes to the Consolidated Financial Statements (Continued) (4) Inventory Dec. 31, 2006 Increasing Decreasing Dec. 31, 2007 during the year during the year Cost I RMB, 1 RMB, 1 RMB, 1 RMB, 1 thousand Yuan thousand Yuan thousand Yuan thousand Yuan Fuel 237,186 7,628,638 (7,628,052) 237,772 Spare parts 136,040 21,249 (31,616) 125,673 Supplementary material 12,977 23,995 (26,034) 10,938 Low-value consumables 284 2,857 (2,708) 433 386,487 7,676,739 (7,688,410) 374,816 Minus: Inventory Price- Reduction－ Spare parts (6,844) - - (6,844) 379,643 367,972 (5) Long-term investment on stocks Dec. 31, 2007 Dec. 31, 2006 RMB, 1 thousand Yuan RMB, 1 thousand Yuan Joint Enterprises (a) 21,000 - Other long-term investment on stocks (b) 94,585 74,385 115,585 74,385 Minus: Depreciation reserves for long-term (2,500) (2,500) investment on stocks (c) 113,085 71,885 (a) Joint Enterprises Shareholdi Registered Nature of Registered ng Ratio of Address business capital proportion voting rights RMB, 1 thousand Yuan - 53 - SHENZHEN NANSHAN POWER CO., LTD Notes to the Financial Statements 2007 China Power Production 70,000 30% 30% Xinchang Power and sale - 54 - SHENZHEN NANSHAN POWER CO., LTD Notes to the Financial Statements 2007 VII. Notes to the Consolidated Financial Statements (Continued) (5) Long-term investment on stocks (Continued) (a) Joint Enterprises (Continued) Till to December 29, 2007, our Company had contributed RMB 21,000,000 Yuan to the China Power Investment Jiangxi Xinchang Power Generation Company Ltd., (Hereinafter refers to as “Xinchang Power” jointly established with China Power Investment Corporation, accounting for 30% equities. Xinchang Power was just established as of December 31st, 2007, and still was in the preparatory period, in addition to the capital contributed by shareholders, there were no any assets and liabilities, and no operating revenues and net profits in 2007, either. (b) Other long-term investment on stocks Till to December 31, 2007, the other long-term investment on stocks included 3.8% equities of Shenzhen Energy Anhui Tongling Power Company Ltd. (Hereinafter refers to as " Anhui Tongling”),10% equities of Shenzhen Energy Environmental-protection Engineering Co., Ltd.( Hereinafter refers to as “Energy Environmental-protection”), and 4% equities of Shenzhen Petrochemical Oil Products Bonded Trading Co., Ltd (Hereinafter refers to as “Petrochemical Oil Products Bonded”) held by Shenzhen Xiefu Oil Supply Company Limited, the subsidiary company of Shenzhen Nanshan Power Station Co., Ltd. In 2007, the Company had invested more capital to Anhui Tongling and Energy Environmental-protection with the capital amount of RMB 7, 410,000 Yuan and RMB 12,790,000 Yuan respectively. (c) Depreciation reserves for long-term investment on stocks The company had conducted the depreciation reserves for full RMB2, 500,000 Yuan of Petrochemical Oil Products Bonded in previous years. - 55 - SHENZHEN NANSHAN POWER CO., LTD Notes to the Financial Statements 2007 VII. Notes to the Consolidated Financial Statements (Continued) (6) Fixed Assets Transportati Housing and on Other Building Equipment equipment equipment Total RMB, 1 RMB, 1 RMB, 1 RMB, 1 RMB, 1 thousand Yuan thousand Yuan thousand Yuan thousand Yuan thousand Yuan Original Price December 31, 2006 400,776 3,797,019 35,414 54,731 4,287,940 Re-classification adjustment 3,448 (13,462) 10,014 - - Transfer of Project under construction 38,496 56,495 635 - 95,626 Acquisition of subsidiaries 13,648 131,063 1,867 356 146,934 Increasing of current year 16,479 1,134 1,919 2,535 22,067 Decreasing of current year (886) (1,502) (5,875) (122) (8,385) December 31, 2007 471,961 3,970,747 43,974 57,500 4,544,182 Accumulated depreciation December 31, 2006 120,990 1,242,820 30,467 41,116 1,435,393 Re-classification adjustment 952 (8,914) 7,962 - - Withdrawing of current year 17,674 206,975 4,827 3,340 232,816 Decreasing of current year (298) (180) (5,123) (90) (5,691) December 31, 2007 139,318 1,440,701 38,133 44,366 1,662,518 Depreciation reserves December 31, 2006 and December 31, 2007 25,668 - - - 25,668 Net Value December 31, 2007 306,975 2,530,046 5,841 13,134 2,855,996 December 31, 2006 254,118 2,554,199 4,947 13,615 2,826,879 Till to December 31, 2007, the equipment valuing net RMB 374, 752,000 Yuan (Original - 56 - SHENZHEN NANSHAN POWER CO., LTD Notes to the Financial Statements 2007 value of RMB 416,257,000 Yuan) was used as the mortgage of the long-term borrowings valuing RMB 210,000,000 Yuan(Note VII (18) (a)). Till to December 31, 2007, the generator sets with the net value of RMB95, 322,000 Yuan (Original value of RMB98, 301,000 Yuan) had been idle because of the termination of power generation business of Zhongshan Power Plant and Zhongfa Power Co., Ltd. Till to December 31, 2007, part of equipment of the Company had been used as the mortgage of the bank loans for the electric power development (Note XIII). - 57 - SHENZHEN NANSHAN POWER CO., LTD Notes to the Financial Statements 2007 VII. Notes to the Consolidated Financial Statements (Continued) (6) Fixed Assets (Continued) Till the December 31, 2007, the fixed asset with the net value of RMB73, 395,000 Yuan (Original value of RMB733, 947,000 Yuan) was still being used. (Till to December 31, 2006: its net value was RMB 62,149,000 Yuan and original value was RMB 621,492,000 Yuan). The costs of depreciation for the 2007operating cost and management fees were as follows respectively: RMB 224,187,000 Yuan (RMB 221,532,000 Yuan in 2006) and RMB 8,629,000 Yuan (RMB 6,033,000 Yuan in 2006). Till to December 31, 2007, the following fixed assets were going to be disposed: Book value Fair value Estimated Estimated disposal cost disposal time RMB, 1 thousand RMB, 1 thousand RMB, 1 thousand Yuan Yuan Yuan Generator Set 95,322 98,301 - 2008First half year - 58 - SHENZHEN NANSHAN POWER STATION CO., LTD Notes to the Financial Statements 2007 VII. Notes to the Consolidated Financial Statements (Continued) (7) Project under construction Transferred Increasing fixed asse Dec. 31, of current t Project Name Company Budget 2006 year RMB, 1 RMB, 1 RMB, 1 RMB, 1 thousand thousand thousand thousand Yuan Yuan Yuan Yuan 1,220,000 Replacing the Small Unit With Nanshan Power 1 Bigger One (Zhongshan) 31,982 31,759 (63,741) Nanshan Power 34,000 2 Gas instead of Oil Project (Zhongshan) 1,484 3,797 - 3 Office building decoration Weimei Power 3,000 97 2,010 (440) 4 Gas instead of Oil Project Weimei Power 44,800 - 1,158 - 5 Gas instead of Oil Project The Company 21,838 13,856 23,277 (26,530) 6 Equipment Renovation Project The Company 9,284 1,847 877 (1,525) 7 Other Project 2,899 1,746 (3,390) 52,165 64,624 (95,626) - 59 - SHENZHEN NANSHAN POWER STATION CO., LTD Notes to the Financial Statements 2007 Of which: Capitalization Amount of Loan Cost － Replacing the Small Unit With Bigger One (See Note Nanshan Power VII(27)) (Zhongshan) 5,421 2,352 (7,773) 52,165 Capitalization Rate for determining 2007 amount of capitalization was 5.4% of annual interest rate (6.70% for the - 60 - VII. Notes to the Consolidated Financial Statements (Continued) (8) Intangible Assets Transferri Amortizat Increasing ng of ion of Accumulated Original Dec. 31, of current current current Dec. 31, amortization Price 2006 year year year 2007 amount RMB, 1 RMB, 1 RMB, 1 RMB, 1 RMB, 1 RMB, 1 thousand thousand thousand thousand thousand thousand RMB, 1 thousand Yuan Yuan Yuan Yuan Yuan Yuan Yuan Land use right 1,110,18 1,073,97 (Note 1) 0 71,698 1,011,064 - (8,791) 1 36,209 Projects preferential earning right (Note 2) - 25,000 - (16,667) (8,333) - - Software use right 218 188 5 - (43) 150 68 1,110,39 1,074,12 8 96,886 1,011,069 (16,667) (17,167) 1 36,277 Minus: depreciation reserves for intangible assets-Land use right (6,768) - - - (6,768) 90,118 - - - 1,067,35 3 Note 1: Till to December 31, 2007, the part of land use right of the Company had been used as the mortgage of bank load for Power Development (Note XIII)and the temporary loan of the Company to Zhongshan Xingzhong Company Limited(Note VII(17)). Till to December 31, 2007, the land use certificate for the land use rights with the net value of RMB 24,938,364 Yuan of the Company (original value of RMB 25,884,100 Yuan) had been under way. Note 2: Projects preferential earning right refers to the right that the capital of RMB 50,000,000 Yuan contributed by the Company to the Zhongfa Power for purchasing equipment that can increase its production capacity can be amortized in the next five years. As for the return of the contribution, our company owns and control the production equipment increased from January 1, 2004 to December 31, 2009, and our company has the right to collect the technical consultation fee of a total of RMB 1,240,000 Yuan commencing from the data that the equipment was put into use, namely September 27, 2004 to December 31, 2009. In September 2007, the Company acquired 75% equity of Zhongfa Power belonging to Power Development. And after the above transaction, Zhongfa Power has been one of subsidiaries of the Company. And on December 20, 2007, the Company entered into the project termination agreement with the Zhongfa Power, 61 and Power Development paid the Company RMB 46,280,000 Yuan, since then, the company has no longer have the ownership right and control right of the power generating equipment, and cannot collect the technology consultation charge and others, a total of about RMB 43,400,000Yuan, of which, RMB14,880,000 has been received. And to the RMB 46,280,000 Yuan paid by Zhongfa Power, technology consultation charge of RMB 14,880,000 Yuan is for the book balance that has been received and RMB 16,667,000 Yuan of book balance of the projects preferential earning right, and the rest balance of RMB 14,733,000 Yuan was included in the current profits and losses. (Note VII (30)). (9) Long-term deferred expenses Dec. 31, 2007 Dec. 31, 2006 RMB, 1 thousand Yuan RMB, 1 thousand Yuan Improvement of the rented fixed assets 2,762 5,303 62 VII. Notes to the Consolidated Financial Statements (Continued) (10) Short-term Loan Dec. 31, 2007 Dec. 31, 2006 RMB, 1 thousand Yuan RMB, 1 thousand Yuan Loan in credit 1,255,391 1,565,023 Loan in assurance －Guarantee (a) 1,113,790 257,647 －Collateral loan (b) 115,554 - 2,484,735 1,822,670 (a) Till to December 31, 2007, for the loan on bank guarantee, the company had fully provided the guarantee with the exception of RMB 16,371,000 Yuan, which the guarantee was provided by the non-affiliated party. (b) Till to December 31, 2007, the pledge for the short-term collateral loan had been the fixed deposit of the Company (Note VII (1)). Weighted average interest rates on deposits of the short-term borrowings in 2007 is 5.70 %( and 5.55% in 2006). Till to December 31, 2007, of the total short-term borrowings, all the borrowings were in U.S. Dollar with the exception of RMB 1,753,917,000Yuan. Till to December 31, 2007, the following were overdue loan in the short-term borrowings: Overdue Reaso n / Annual Expected interest repayment Dec. 31 2007 Expiry date rate period RMB, 1 thousand Yuan Loan in assurance － Guarantee (a) China Construction Bank 10,000 Nov. 29,2007 6.73% Note 1 Corporation Bank of Communications 6,371 Aug. 18 2006 5.58% Note 2 16,371 Note 1: Debt restructuring were conducted by the Zhongfa Power of the Company’s subsidiary and the China Construction Bank Corporation, therefore, the debt has not repaid in time. And because the time for the completion of the relevant debt restructuring has not 63 determined, the repayment period cannot be fixed. Note 2: As the debt restructuring were conducted by the Zhongfa Power of the Company’s subsidiary and the China Construction Bank Corporation, the debt has not repaid in time. And the relevant debt restructuring is expected to be completed in 2008. 64 VII. Notes to the Consolidated Financial Statements (Continued) (11) Notes Payable Dec. 31, 2007 Dec. 31, 2006 RMB, 1 thousand Yuan RMB, 1 thousand Yuan Banker's acceptance 129,910 259,376 Commercial acceptance 124,180 169,167 254,090 428,543 All notes payable expire within six months. (12) Account Payable Till to December 31, 2007 to the accounts payable, there should be no fund of the shareholders who hold over 5% (including 5%) voting rights. Till to December 31, 2007, to the accounts payable, there should be no the significant fund with the age over one year. (13) Advance receipts Advance receipts are the fund that does not pay in advance to shareholders holding over 5% (including 5%) voting rights of the Company within a year. (14) Wages payable Increasing of Decreasing of Dec. 31, 2006 current year current year Dec. 31, 2007 RMB, 1 RMB, 1 RMB, 1 RMB, 1 thousand Yuan thousand Yuan thousand Yuan thousand Yuan Wages, bonuses, allowances and subsidies 40,385 112,465 (105,936) 46,914 Workers’ welfares - 11,150 (11,150) - Social insurance premiums 11,589 17,830 (13,517) 15,902 of which, Medicare 2,846 3,836 (1,777) 4,905 Basic endowment insurance 8,729 13,894 (11,652) 10,971 Unemployment insurance premium 3 13 (10) 6 Work injury insurance premium 10 82 (74) 18 Childbirth insurance premium 1 5 (4) 2 Housing accumulation fund 4,435 6,857 (7,182) 4,110 Labor-union expenses and staff education expenses 546 2,668 (2,123) 1,091 Others - 10,389 (9,995) 394 56,955 161,359 (149,903) 68,411 65 VII. Notes to the Consolidated Financial Statements (Continue) (15) Tax payable Dec. 31, 2007 Dec. 31, 2006 RMB, 1 thousand Yuan RMB, 1 thousand Yuan Corporate income tax payable 2,930 19,870 Business tax payable 742 2,705 VAT to be deducted－input tax (182,782) (116,890) Individual income tax payable 1,061 (3,041) Urban maintenance and construction tax 1,195 payable 1,190 Others 267 64 (176,592) (96,097) (16) Dividends payable Dec. 31, 2007 Dec. 31, 2006 RMB, 1 thousand Yuan RMB, 1 thousand Yuan Domestic listed Renminbi payable Ordinary Shareholders 9 9 (17) Other payables. Dec. 31, 2007 Dec. 31, 2006 RMB, 1 thousand Yuan RMB, 1 thousand Yuan Temporary borrowings to Power Development payable 257,972 - Temporary borrowings to Zhongshan Xingzhong Company Ltd. payable (Note 1) 139,652 - Temporary borrowings to Zhongshan financial bureau payable 57,772 - Project fund payable 52,331 44,622 Funds to Xinyuan Company payable(Note IX (2)) 24,740 - Funds payable for Quality assurance 3,240 3,106 Current account payable to Shenzhen Energy Group Co., Ltd. 1,190 1,205 Others 26,351 23,203 563,248 72,136 Till to December 31, 2007, among the other payables, RMB 1,190,000 Yuan should be paid to the shareholders who hold over 5% (including 5%) voting rights of the Company. (Note XI (4)). 66 VII. Notes to the Consolidated Financial Statements (Continued) (17) Other payables (Continued) The total of other payables with the age of more than one year till to December 31, 2007 was RMB 355,572,000 Yuan (RMB 22,815,000 Yuan till to December 31, 2006), mainly the temporary borrowings to Power Development from Zhongshan Power and Zhongshang Power Plants, and the accounts payable for project and equipment. And as to the age of the above temporary borrowings to Power Development, continuous calculation is adopted based on the previous age before the Zhongshan Power and Zhongshan Power Plant was acquired. No significant foreign currency balance exists in the account payable. The land use right of the Company is used as the pledge of the temporary borrowings that should be paid to Zhongshan Xingzhong Co., Ltd (See Note VII (8)). (18) Long-term Load Dec. 31, 2007 Dec. 31, 2006 RMB, 1 thousand Yuan RMB, 1 thousand Yuan Secured borrowings (a) －Guaranteed 72,000 46,000 －Mortgage 210,000 270,000 Borrowings on credit - 322,314 282,000 638,314 Minus: Long-term loans due within one year －Guaranteed (46,000) - －Mortgage (60,000) (60,000) Borrowings on credit - (248,111) (106,000) (308,111) 176,000 330,203 (a) Till to December 31, 2007, the long-term load had included: Loan on bank guarantee of RMB 72,000,000 Yuan (RMB 46,000,000 Yuan in 2006), which was provided by the Company to the subsidiary, and the interest was paid monthly, of which, the principal of RMB 46,000,000 Yuan should be paid on November 7, 2008 and a total of RMB 26,000,000 Yuan should be paid on January 17, 2009. Bank collateral loan of RMB 210,000,000 Yuan (RMB 270,000,000 Yuan in 2006), which the fixed asset of the Company was used as the pledge (Note VII (6)), and the interest was 67 paid monthly, of which, the principal of RMB60, 000,000 Yuan should be paid before December 31, 2008 averagely and quarterly and RMB150, 000,000 Yuan should be paid before August 29, 2010 averagely and quarterly. 68 VII. Notes to the Consolidated Financial Statements (Continued) (18) Long-term Load (continued) The long-term loan is listed as follows by banks: Dec. 31, 2007 Dec. 31, 2006 RMB, 1 thousand Yuan RMB, 1 thousand Yuan China Minsheng Bank 210,000 270,000 Huaxia Bank 72,000 46,000 Bank of China - 102,334 Shenzhen Ping An Bank - 89,980 China Merchants Bank Co., Ltd - 130,000 282,000 638,314 The long-term loan is listed as following by expiry date Dec. 31, 2007 Dec. 31, 2006 RMB, 1 thousand Yuan RMB, 1 thousand Yuan One to two years 86,000 157,869 Two to five years 90,000 172,334 176,000 330,203 Weighted average interest rate on the long-term borrowings in 2007 is 5.65% (and 5.93% in 2006). Till to December 31, 2007, the balance of long-term load is in the RMB unit 69 VII. Notes to the Consolidated Financial Statements (Continued) (19) Deferred income tax asset (a) Deferred income tax asset Dec. 31, 2007 Dec. 31, 2006 Deferred income Deductible Deferred income Deductible tax asset temporary tax asset temporary difference difference RMB, 1 thousand RMB, 1 thousand RMB, 1 thousand RMB, 1 thousand Yuan Yuan Yuan Yuan Provision for 10,852 43,409 5,374 36,209 devalued assets Deductible loss - - 56 746 Unpaid wage 5,632 31,145 4,869 36,150 16,484 74,554 10,299 73,105 As indicated in the Note V of the financial statement, the applicable enterprise income tax rate of the company and the subsidiaries gradually changed from 15% to25% since January 1, 2008. And the applicable enterprise income rate of parts of subsidiaries changed from27% or 33% to 25% since January 1, 2008. And because the tax rate for calculating the deferred income tax asset is the applicable one based on the provisions of the tax law during the recovery of asset, for the deferred income tax assets of the Company that is expected to be recovered after January 1, 2008 and has been identified before the issue of the new income tax law,. The company conducted, in accordance the applicable tax rates the adjustment on the book balance, and then difference was about RMB 5,060,000 Yuan, which is included in the current income tax expense (Note VII (31)). Till to December 31, 2007, the deductible loss from the Company to part of subsidiaries was RMB 362,920,000 Yuan (and RMB 298,737,000 Yuan till to December 31, 2006), and the RMB 88,213,000 Yuan is identified as the relevant deferred income tax assets (and RMB 44,811,000 Yuan till to 31 December 2006). Of the above deductible loss, the amounts of RMB 19,738,000 Yuan (RMB 8,215,000 Yuan till to December 31, 2006), and RMB 189,978,000 Yuan (RMB 210,940,000 Yuan till to December 31, 2006), and RMB 77,662,000 Yuan (RMB 79,582,000 Yuan ill to December 31, 2006) as well as RMB 75,542,000 Yuan (None in 2006) were respectively used to offset the taxable income prior to 2009, 2010, 2011 and2012. 70 VII. Notes to the Consolidated Financial Statements (Continued) (20) Capital Stock Dec. 31, 2007 Dec. 31, 2006 RMB, 1 thousand Yuan RMB, 1 thousand Yuan Restricted Shares Renminbi ordinary shares 145,847 228,050 Foreign Investment Shares Inside China 83,749 83,749 229,596 311,799 Unrestricted Shares Renminbi ordinary shares 162,251 80,048 Foreign Investment Shares Inside China 156,119 156,119 318,370 236,167 Total shares 547,966 547,966 (21) Capital Reserves Increasing of current yea Decreasing of Dec. 31, 2006 r current year Dec. 31, 2007 RMB, 1 RMB, 1 RMB, 1 RMB, 1 thousand Yuan thousand Yuan thousand Yuan thousand Yuan Share premium 215,488 - - 215,488 Other capital reserves－ The difference between minority interest and identifiable net assets from invested company calculated based on the new increased shareholding proportion (Note IX (2)) - 18,511 - 18,511 Transferred from original system capital surplus 129,631 - - 129,631 345,119 18,511 - 363,630 71 VII. Notes to the Consolidated Financial Statements (Continued) (22) Surplus reserve Dec. 31, 2006 Withdrawing of Decreasing of Dec. 31, 2007 current year current year RMB, 1 RMB, 1 RMB, 1 RMB, 1 thousand Yuan thousand Yuan thousand Yuan thousand Yuan Legal earned surplus reserve 297,565 12,595 - 310,160 Other surplus reserve 22,749 - - 22,749 320,314 12,595 - 332,909 In accordance with “Company Law of the People’s Republic of China", articles of association of the Company, and resolutions of the Board of directors, the company can make allocations to the legal earned surplus reserve by 10% annual net profit of the company, in case the legal earned surplus reserve is high than 50% of the capital stock, no more reserve can be got. The legal earned surplus reserve can be used for making up the losses with the authorization or for increasing the capital stock. In 2007, the company got the legal earned surplus reserve of RMB 12,595,000 Yuan by 10% annual net profit (And RMB 10,722,000 Yuan in 2006 with the proportion of calculated and withdrawn of10%.) The withdrawal amount of the Company’s other surplus reserve is proposed by the board of directors first and obtained the approval of the shareholders' meeting second. The other surplus reserve can be used for making up the losses with the authorization or for increasing the capital stock. While in this year, the director of directors did not propose the withdrawing of other surplus reserve (None in 2006). (23) Profit Distribution According to the resolution of board of directors dated April 15, 2008, the board of directors proposed that the Company distributed cash dividend to all the shareholders and RMB 0.03 each share. Calculating based on the issued shares 547,966,000, RMB 16,439,000 cash dividend was planned to be distributed. And taking the issued shares 547,966,000 of the Company in year 2007as the cardinal number, one bonus share for each ten shares will be distributed. The aforesaid proposal needs to be examined and approved in Shareholders’ General meeting, and the cash dividend which is planned to be distributed is not confirmed as the liabilities as of Dec.31, 2007. (24) Minority Shareholders' Rights and Interests The minority shareholders’ rights and interests belong to the minority shareholders in the subsidiaries. Dec. 31, 2007 Dec. 31, 2006 RMB, 1 thousand Yuan RMB, 1 thousand Yuan 72 Weimei Power 75,165 124,742 Xiefu Oil Supply 29,452 24,588 Nanshan Power (Zhongshan) 16,405 24,050 Zhongshan Power Plant 15,637 - Zhongfa Power 4,532 - Engineering Company - 34,174 Huidong Xiefu - - 141,191 207,554 73 VII. Notes to the Consolidated Financial Statements (Continued) (25) Operating Revenue and Operating Cost 2007 2006 RMB, 1 thousand Yuan RMB, 1 thousand Yuan Main operating revenue 3,617,150 3,863,296 Other operating revenue 2,974 11,283 3,620,124 3,874,579 (a) Main operating revenue and main operating cost 2007 2006 Prime operating Prime operating Prime operating Prime operating revenue costs revenue costs RMB, 1 thousand RMB, 1 thousand RMB, 1 thousand RMB, 1 thousand Yuan Yuan Yuan Yuan Business of electricity sale 3,335,522 3,527,027 3,425,109 3,632,772 Business of fuel sale 196,310 188,358 311,445 311,183 Business of Thermal Power Sale Engineering Consulting business 56,161 53,948 92,767 86,024 Business of electricity sale 24,976 11,935 29,585 8,760 Others 4,181 6,663 4,390 4,302 3,617,150 3,787,931 3,863,296 4,043,041 The total sales revenue of the Company’s top five customers is RMB 3,490,758,000 Yuan, accounting for 97% of the total sales revenue. (b) Other operating revenue and other operating cost 2007 2006 Other operating Other operating Other operating Other operating revenue revenue revenue revenue RMB, 1 thousand RMB, 1 thousand RMB, 1 thousand RMB, 1 thousand Yuan Yuan Yuan Yuan Income payment for 1,526 78 3,678 - the use of state funds Rental income 1,363 80 734 23 Training revenues - - 2,229 656 Income from the - - 4,441 - 74 transfer of property Others 85 - 201 3,009 2,974 158 11,283 3,688 75 VII. Notes to the Consolidated Financial Statements (Continued) (26) Sales Tax and Extra Charges 2007 2006 RMB, 1 thousand Yuan RMB, 1 thousand Yuan Business tax 4,419 3,093 Urban maintenance and construction tax 1,063 493 Others 607 668 6,089 4,254 (27) Financing expenses 2007 2006 RMB, 1 thousand Yuan RMB, 1 thousand Yuan Interest expense-borrowing interest 184,042 148,138 Minus: Capitalized interest (Note VII (7)) (2,352) (5,128) 181,690 143,010 Minus: Interest income (5,485) (5,163) Exchange losses 950 839 Minus: exchange gains (50,570) (19,884) Others 396 854 126,981 119,656 (28) Asset impairment loss 2007 2006 RMB, 1 thousand Yuan RMB, 1 thousand Yuan Bad debt losses 4,645 7,444 Impairment for long-term equity investment - 1,275 4,645 8,719 76 VII. Notes to the Consolidated Financial Statements (Continued) (29) Investment income 2007 2006 RMB, 1 thousand Yuan RMB, 1 thousand Yuan Income from the transfer of the stocks of joint companies - 2,206 (30) Non-operating income 2007 2006 RMB, 1 thousand Yuan RMB, 1 thousand Yuan Revenue from Fuel subsidies (Note 1) 403,133 446,564 The difference between the combination cost and the fair value of the identifiable net assets it obtains from the acquiree (Note IX (1)) 89,065 - Income from the disposed intangible assets - (Note VII (8)) 14,733 Income from subsidies (Note 2) 2,000 3,000 Others 408 444 509,339 450,008 Note 1: In accordance with the SFB [2007] No. 22 issued by Shenzhen Municipal Government and relevant documents of Shenzhen Trade and Industry Bureau, the company has received the government subsidies for offsetting the fuel costs loss of grid purchase price beyond the authorization because of the rise in fuel price. Note 2: the 2007 subsidy is the environmental-protection subsidy to Shenzhen Nanshan Power Station Co., Ltd (Zhongshan) issued by Zhongshan Trade and Economic Cooperation Bureau while the 2006 subsidy is the small & medium-sized interest subsidy fund to Shenzhen Nanshan Power Station Co., Ltd (Zhongshan) issued by Zhongshan Trade and Economic Cooperation Bureau. 77 VII. Notes to the Consolidated Financial Statements (Continued) (31) Income tax 2007 2006 RMB, 1 thousand Yuan RMB, 1 thousand Yuan Current income tax 3,602 (1,617) Deferred income tax (6,185) (1,363) (2,583) (2,980) The total profit shown in the consolidated income statement is adjusted into the income tax: 2007 2006 RMB, 1 thousand Yuan RMB, 1 thousand Yuan Income tax expenses calculated based on the applicable tax rate 94,963 54,312 The impact of the issuing of the new income tax law on the identified original balance of deferred income tax (Note VII (19)) Profits in the tax preference period 14,245 8,147 Non-taxable income (5,060) - Income tax deductions granted for the purchase of home-made machinery and equipment (2,363) (2,096) The deductible loss of the current unrecognized deferred income tax assets (13,360) (1,221) Costs, expenses and losses that can not be deducted (7,506) (22,840) Income tax expenses calculated based on the applicable tax rate 11,446 14,988 The impact of the issuing of the new income tax law on the identified original balance of deferred income tax (Note VII (19)) 15 42 (2,583) (2,980) 78 VII. Notes to the Consolidated Financial Statements (Continued) (32) Earnings per share (a) Basic Earnings per share The basic earnings per share are the value of the combined net profit of the ordinary shareholders in the parent company divided by the weighted average of the outstanding ordinary shares of the parent company: 2007 2006 RMB, 1 thousand Yuan RMB, 1 thousand Yuan Attributable to the combination of ordinary shareholders of the parent company Net profit 118,086 63,133 Weighted average number of ordinary shares which are issued to the public (1'000 shares) Basic earnings per share (RMB) 547,966 547,966 Basic EPS (RMB) 0.22 0.12 (b) Diluted earnings per share Diluted earnings per share, is the value of the combined net profit of the ordinary shareholders in the parent company based on the adjustment on diluted potential ordinary shares divided by the weighted average of the outstanding ordinary shares of the parent company after adjustment. The company had not the diluted potential ordinary share in 2007 (2006: None), therefore, the diluted earnings per share is the same to the basic earnings per share. 79 VII. Notes to the Consolidated Financial Statements (Continued) (33) Notes to Cash Flow Statement (a) Adjust the net profit into the cash flow of operating activities 2007 2006 RMB, 1 thousand Yuan RMB, 1 thousand Yuan Net profit 97,546 57,292 Plus: Assets Devaluation Preparation 4,645 8,719 Depreciation of fixed assets 232,816 223,770 Amortization of intangible assets 17,167 12,180 Amortization of Long-term deferred expenses 2,541 3,115 Income from the disposal of fixed assets, intangible assets and other long-term assets (14,346) (434) Difference between the combination cost and the fair value of the identifiable net assets it obtains from the acquiree (89,065) - Interest expense 181,690 143,010 Investment income - (2,206) Increasing of deferred income tax assets (6,185) (1,363) Inventory reduction 18,865 50,686 Increase in operating receivables (108,478) (368,484) Decrease in operating receivables (134,526) (257,479) Net Cash flow generated from operating activities 202,670 (131,194) (b) Changes of cash and cash equivalents 2007 2006 RMB, 1 thousand Yuan RMB, 1 thousand Yuan Annual closing balance of cash and cash equivalents 286,090 623,514 Minus: Annual opening balance of cash and cash equivalents (623,514) (307,527) Net decrease/ Increase in cash and cash equivalents (337,424) 315,987 80 VII. Notes to the Consolidated Financial Statements (Continued) (33)Notes to Consolidated Cash Flow Statement (Continued) (c) Cash and cash equivalent Dec. 31, 2007 Dec. 31, 2006 RMB, 1 thousand Yuan RMB, 1 thousand Yuan Monetary capital－ Cash on hand 764 611 Bank deposits 285,056 622,080 Other monetary capital 133,352 823 419,172 623,514 Minus: restricted deposits (Note 1) (133,082) - Annual closing balance of cash and cash 286,090 equivalents 623,514 Note 1: The deposits subject to limitation include the collateral loan for the fixed deposits of RMB 115,378,000 Yuan of the short-term bank borrowings, and bank deposit of RMB 17,704,000 Yuan whose use subject to limitation for issuing notes payable (Note VII (1)) . (d) Cash Payment for other operating-rated activities The cash payment for other operating-rated activities in the cash flow statement mainly includes: 2007 2006 RMB, 1 thousand Yuan RMB, 1 thousand Yuan Rental fee 4,526 4,486 Office allowance 645 667 Business entertainment 3,956 2,815 Transportation costs 2,923 2,862 Board charge 4,636 3,984 Project cost 3,427 551 Entertainment expenses 3,515 2,642 Enterprise culture charges 2,660 1,933 Cost for Intermediary organs 4,168 8,023 Telecommunication charges 1,121 1,135 Others 8,293 6,678 39,870 35,776 81 VIII Segment Report (1) Main report form-Business segments (a) Segment Information of 2007 and December 31, 2007 The construction of power plant and Electricity relevant and heating businesses O supply Fuel trade and others f offset Total RMB, 1 RMB, 1 RMB, 1 RMB, 1 RMB, 1 thousand thousand thousand thousand thousand Yuan Yuan Yuan Yuan Yuan Operating income 3,396,650 1,906,014 25,060 (1,707,600) 3,620,124 Of which: foreign trading income 3,396,650 198,414 25,060 - 3,620,124 Income from trading between segments - 1,707,600 - (1,707,600) - Operating expenses (3,830,702) (1,895,981) (15,952) 1,711,256 (4,031,379) Segment (loss)/ profit (434,052) 10,033 9,108 3,656 (411,255) Plus: in-distributable charge - - - - - Operating (loss)/profit (434,052) 10,033 9,108 3,656 (411,255) Segment assets 5,055,746 538,208 365,655 (406,695) 5,552,914 Plus: in-distributable asset - - - - - Total assets 5,055,746 538,208 365,655 (406,695) 5,552,914 Segment liabilities 4,033,037 479,765 50,278 (876,376) 3,686,704 Plus: in-distributable liabilities - - - - - Total liabilities 4,033,037 479,765 50,278 (876,376) 3,686,704 Depreciation and amortization costs 246,613 8,950 617 (3,656) 252,524 Asset devaluation losses 3,218 777 650 - 4,645 Capital expenditure 83,538 2,886 272 - 86,696 82 VIII Segment Report (continued) (b) Segment Information of 2006 and December 31, 2006 The construction of power plant and Electricity relevant and heating businesses O supply Fuel trade and others f Offset Total RMB, 1 RMB, 1 RMB, 1 RMB, 1 RMB, 1 thousand thousand thousand thousand thousand Yuan Yuan Yuan Yuan Yuan Operating income 3,533,548 2,477,369 37,981 (2,174,319) 3,874,579 Of which: foreign trading income 3,533,548 311,445 29,586 - 3,874,579 Income from trading between segments - 2,165,924 8,395 (2,174,319) - Operating expenses (3,956,838) (2,469,125) (10,486) 2,166,493 (4,269,956) Segment (loss)/ profit (423,290) 8,244 27,495 (7,826) (395,377) Plus: in-distributable charge - - - - - Operating (loss)/profit (423,290) 8,244 27,495 (7,826) (395,377) Segment assets 4,467,487 334,230 315,927 (345,886) 4,771,758 Plus: in-distributable asset - - - - - Total assets 4,467,487 334,230 315,927 (345,886) 4,771,758 Segment liabilities 2,697,953 284,323 40,099 (44,995) 2,977,380 Plus: in-distributable liabilities - - - - - Total liabilities 2,697,953 284,323 40,099 (44,995) 2,977,380 Depreciation and amortization costs 228,856 9,883 326 - 239,065 Asset devaluation losses 7,380 999 340 - 8,719 Capital expenditure 136,338 - - - 136,338 (2) Secondary report form-Geographical Segment All sales revenue of the Company source from mainland China and all assets of the Company are located in mainland China, therefore, the establishment of geographical segment of the Company is no necessary. 83 Ⅸ Business combination (1) Business combination not under the same control On September 2007, our company purchased with zero consideration the equity of 75% respectively from Zhongshan Power Plant and Zhongfa Power which are held by Power Development. The date of acquisition of this transaction is September 30, 2007, on which our company actually got the control right of Zhongshan Power Plant and Zhongfa Power. Zhongshan Power Plant and Zhongfa Power are two independent enterprise legal entities, and our company has signed the equity transfer agreements with Power Development separately on these equity acquisitions. According to relevant files concerning these acquisitions, the acquisition of equities of Zhongshan Power Plant and Zhongfa Power should be carried out as a whole and only one consideration will be confirmed. Considering the operational businesses of Zhongshan Power Plant and Zhongfa Power are all electric power production and sales, the accounting treatment of equity acquisitions is confirmed to be carried out according to single item acquisition. When the acquisition of equities of Zhongshan Power Plant and Zhongfa Power were finished, Zhongshan Power Plant and Zhongfa Power were consulting with many banks on the debt reorganization with respect to their bank loans (“debt reorganization”). The debt reorganization had great uncertainty when the equity acquisitions were finished, so the influence of debt reorganization was not considered when confirming the net assets and business reputation acquired from the equity acquisitions. On November 19, 2007, Zhongfa Power and Bank of China Zhongshan Branch signed the agreements on interest reduction and exemption, and Bank of China Zhongshan Branch reduced and exempted totally RMB64, 678,000 Yuan of loan interest of Zhongfa Power. The net assets and business reputation acquired from the equity acquisitions were also confirmed to be adjusted accordingly on the date of acquisition. As stated in Note VII (8), on December 20, 2007, our company signed with Zhongfa Power the termination agreement of project preferential usufruct. According to relevant agreements, our company gave up the technological advisory fee and other funds totally RMB43, 400,000 Yuan drew according to project preferential usufruct but unpaid by Zhongfa Power before purchasing the equity of Zhongfa Power. The net assets and business reputation acquired from the equity acquisition of Zhongfa Power were also confirmed to be adjusted accordingly on the date of acquisition. As described above, the loan interest of Zhongfa Power reduced and exempted by Bank of China Zhongshan Branch, and the technological advisory fee and other funds of Zhongfa Power reduced and exempted by our company are totally RMB108, 078,000 Yuan. Calculated on the basis of 75% of the equity that our company purchased from Zhongfa Power, the accordingly increased identifiable fair value of net assets that our company acquired from Zhongfa Power on the date of acquisition is about RMB81, 059,000 Yuan. 84 Until the date on which this report was made, the debt reorganizations of Zhongshan Power Plant and Zhongfa Power with other banks had not finished, so the debt reorganizations’ influence on the finance of our company could not be estimated. If the debt reorganizations’ influence on the finance of our company can be confirmed within one year after the abovementioned equity acquisitions are finished, our group will adjust the confirmed net assets and business reputation acquired from the equity acquisitions, according to relevant financial influence confirmed. 85 Ⅸ Business combination (continued) (1) Business combination not under the same control (continued) The net assets and business reputation acquired from the abovementioned acquisitions are confirmed as follows: Zhongshan Power Plant and Zhongfa Power RMB thousand Yuan Acquisition cost of combination - Less: the identifiable fair value of net assets acquired on the date of acquisition according to the acquisition equity proportion (8,006) The combination cost is smaller than the identifiable fair value of net assets acquired according to the acquisition equity proportion on the date of acquisition 8,006 Add: increase of the identifiable fair value of net assets acquired after the date of acquisition according to the acquisition equity proportion 81,059 The combination cost is smaller than the identifiable fair value of net assets acquired according to the acquisition equity proportion 89,065 The assets and debts of Zhongshan Power Plant and Zhongfa Power acquired on the date of acquisition, and the cash flow conditions related to the acquisitions are listed as follows: Fair value Book value Date of Date of acquisition acquisition Dec. 31, 2006 RMB RMB thousand RMB thousand Yuan Yuan thousand Yuan Cash and cash equivalent 484 484 682 Accounts receivable 16,427 16,427 34,057 Inventory 7,194 5,688 15,419 Fixed assets 146,934 134,815 542,678 Intangible assets 1,011,064 359,483 363,078 Loans (533,051) (533,051) (633,052) Accounts payable (537,874) (537,874) (84,595) Staff salary payable (503) (503) (8,028) Other payables (100,000) (100,000) (411,846) Net assets 10,675 (654, 531) (181,607) Less: A few stockholders' equities (2,669) 163,633 - Net assets /(net liabilities) acquired 8,006 (490,898) (181,607) The consideration paid in cash 86 Less: the acquired cash and cash equivalent of the purchased subsidiary 484 - - The net amount of cash paid by the subsidiary (484) - - 87 Ⅸ Business combination (continued) (1) Business combination not under the same control (continued) The income, net profit and cash flow of Zhongshan Power Plant and Zhongfa Power in the period since the date of acquisition to December 31, 2007 are listed as follows: RMB thousand Yuan Operating revenue - Net loss 38,077 Our company finished the acquisition of equities of Zhongshan Power Plant and Zhongfa Power on September 30, 2007. The main expenses occurred from the date of acquisition to December 31, 2007 are withholding loan interests, whose cash flow has no great influence on our group. (2) Purchasing a few stockholders' equities In December, 2007, a wholly-owned subsidiary of our company, Syndisome purchased the equities ("equity purchase") of 40% and 15% respectively from Engineering Company and Weimei Electric Power held by Nangang Power and Xinyuan Company separately, and the purchasing considerations are RMB7, 520,000 Yuan and RMB49, 480,000 Yuan respectively and are paid in cash. The industrial and commercial alteration formalities needed for the abovementioned purchasing of Engineering Company and Weimei Electric Power have been finished separately on December 14, 2007 and December 26, 2007. Our company determines the completion time of equity purchasing according to the completion time of industrial and commercial alteration. Until December 31, 2007, the abovementioned purchasing consideration of RMB24, 740,000 Yuan has not been paid to Xinyuan Company, but the unpaid consideration has been paid on January 29, 2008. After completion of this purchasing, our company owns directly and indirectly the equities of 100% and 70% of Engineering Company and Weimei Electric Power respectively. The assets, debts and net assets and business reputation acquired on the trading day of the abovementioned equity purchasing, are confirmed as follows: Engineering Company Weimei Electric Power Fair value Book value Fair value Book value RMB RMB RMB RMB thousand thousand thousand thousand Yuan Yuan Yuan Yuan Current assets 112,047 112,047 185,581 185,581 Non-current assets 1,807 1,807 991,567 877,161 Current liability (19,005) (19,005) (636,271) (636,271) Non-current liability - - (176,000) (176,000) 88 Net assets 94,849 94,849 364,877 250,471 Proportion of equity purchased 40% 40% 15% 15% Net assets acquired 37,940 37,940 54,732 37,571 89 Ⅸ Business combination (continued) (2) Purchasing a few stockholders' equities (continued) Engineering Weimei Electric Company Power Total RMB thousand RMB thousand RMB Yuan Yuan thousand Yuan Purchasing cost – cash paid 7,520 49,480 Less: the identifiable fair value of net assets acquired from the subsidiary on the trading day according to the new equity proportion (37,940) (54,732) (30,420) (5,252) Purchasing cost – cash paid 7,520 49,480 57,000 Less: the identifiable net assets share of the subsidiary from the combination date, that is confirmed to be enjoyed, and calculated on the trading day according the new equity proportion (37,940) (37,571) (75,511) Less: business reputation (Note 1) - - - Additional paid-in capital adjustment (Note XXI) (30,420) 11,909 (18,511) Note 1: Because the equity purchasing cost is smaller than the identifiable fair value of net assets shared according to the proportion of equity acquired on the trading day, so the equity purchasing involves no business reputation. The balance between the purchasing cost and the identifiable net assets share of the subsidiary from the combination date, that is confirmed to be enjoyed, and calculated on the trading day according the new equity proportion is confirmed to be the additional paid-in capital. Ⅹ Main item notes of the financial statement of the parent company (1) Account receivable and other receivables (a) Account receivable Dec. 31, 2006 Dec. 31, 2007 RMB thousand RMB thousand Yuan Yuan Account receivable 163,756 233,251 Increase of Decrease of current year current year 90 RMB thousand RMB thousand Yuan Yuan Less: dead account preparation - - - - 163,756 233,251 The account receivable mainly refers to the electricity payment of Shenzhen Power Supply Bureau, Guangdong Power Grid Corporation within one year. 91 Ⅹ Main item notes of the financial statement of the parent company (continued) (1) Account receivable and other receivables (continued) (b) Other receivables Dec. 31, 2006 Dec. 31, 2007 RMB thousand RMB thousand Yuan Yuan The technology service charge and temporary loan that should be collected from Zhongfa Power 14,880 473,547 The current account that should be collected from Engineering Company 13,975 2,133 Temporary loan that should be collected from Shenzhen Nanshan Power (Zhongshan) - 69,579 Fund receivable of the development project of the Big Stone Lake, Huizhou 14,312 14,312 The current account that should be collected from Nanshan Investment Management Company 5,896 5,896 Temporary loan that should be collected from Weimei Electric Power 59,312 - Others 25,750 7,787 134,125 573,254 Increase of Decrease of current year current year RMB thousand RMB thousand Yuan Yuan Less: dead account preparation (21,612) (2,470) - (24,082) 112,513 549,172 Other receivables and corresponding dead account preparation are analysed as follows: Dec. 31, 2007 Dec. 31, 2006 92 Dead Accrui Dead Proporti account ng Proporti account on of preparatio propor on of preparatio Accruing Amount the total n tion Amount the total n proportion RMB RMB RMB RMB thousand thousand thousand thousand Yuan Yuan Yuan Yuan Within one year 544,585 95% - - 46,602 35% - - One to two years 2,757 - 138 5% 19,011 14% 764 4% Two to three years 41 - 4 10% 47,561 35% 492 1% Over three years 25,871 5% 23,940 93% 20,951 16% 20,356 97% 573,254 100% 24,082 4% 134,125 100% 21,612 16% 93 Ⅹ Main item notes of the financial statement of the parent company (continued) (1) Account receivable and other receivables (continued) (b) Other receivables (continued) Other receivables are analyzed as follows according to the classification: Dec. 31, 2007 Dec. 31, 2006 Propo Dead Accrui Propo Dead Accrui rtion account ng rtion account ng of the preparatio propor of the preparatio propor Amount total n tion Amount total n tion RMB RMB RMB RMB thousand thousand thousand thousand Yuan Yuan Yuan Yuan With significant single amount 557,438 97% 14,312 26% 102,479 76% 14,312 14% With insignificant single amount but great portfolio risk 5,896 1% 5,896 100% 5,896 5% 5,896 100% Others 9,920 2% 3,874 39% 25,750 19% 1,404 5% 573,254 100% 24,082 4% 134,125 100% 21,612 16% Other receivables exclude the debts of the shareholders who hold over 5% (including 5%) of voting share of our company. At the end of the year, the amount of the debts of the top five debtors of other receivables is RMB566, 796,000 Yuan, accounting for 99% of total of other receivables. Receivables with significant single amount mainly include the fund receivable of the development project of the Big Stone Lake, Huizhou, the account age of which is over three years, and the management layer adopts specific identification method to draw the dead account preparation in total amount, relying on the historical experience and analysis and auditing of the project. Other funds include the temporary loan that should be collected from the subsidiary, the account age of which is within one year, and the management layer after analysis and auditing according to the nature of the funds, thinks that the funds have no recovery risk, so the dead account preparation is not drew. Receivables with insignificant single amount but great portfolio risk mainly refer to those with account age of more than three years, and the management layer thinks that these receivables have higher recovery risk, so the dead account preparation in total amount is drew for the receivables according to historical experience. (2) Long-term equity investment 94 Dec. 31, 2007 Dec. 31, 2006 RMB thousand Yuan RMB thousand Yuan Subsidiary(a) 444,183 444,183 Associated enterprise (Note VII (5)) 21,000 - Other long-term equity investment (Note VII(5)) 92,085 71,885 557,268 516,068 Less: The depreciation reserves of long-term equity investment - - 557,268 516,068 95 Ⅹ Main item notes of the financial statement of the parent company (continued) (2) Long-term equity investment (continued) (a) Subsidiary Increase Decrease Initial Additional Dec. 31, of current of current Dec. 31, investment cost investment 2006 year year 2007 RMB RMB RMB RMB RMB RMB thousand thousand thousand thousand thousand thousand Yuan Yuan Yuan Yuan Yuan Yuan Shenzhen Nanshan Power (Zhongshan) 54,560 163,680 218,240 - - 218,240 Weimei Electric Power 39,680 75,639 115,319 - - 115,319 New Power 14,950 56,320 71,270 - - 71,270 Shenzhen Server Petrochemical Supplying 26,650 - 26,650 - - 26,650 Shennan Energy (Singapore) Pte Ltd 6,704 - 6,704 - - 6,704 Engineering Company 6,000 - 6,000 - - 6,000 Zhongshan Power Plant (Note IX (1)) - - - - - - Zhongfa Power(Note IX (1)) - - - - - - 444,183 - - 444,183 (3) Operating revenue and operating cost 2007 2006 RMB thousand Yuan RMB thousand Yuan Main business income 1,198,796 1,373,917 Other operating revenue 38,109 36,435 1,236,905 1,410,352 (a) Main business income and main business cost 2007 2006 Main business Main business Main business Main business cost income cost income RMB thousand RMB thousand RMB thousand Yuan RMB thousand Yuan Yuan Yuan Business of 1,166,541 1,588,478 1,322,902 1,647,476 electricity sales 96 Business of heat 32,255 28,289 45,245 39,616 sales Business of project - - 5,770 82 contracting 1,198,796 1,616,767 1,373,917 1,687,174 The gross income from the sales to the top five customers of our company is RMB1, 195,896,000 Yuan, accounting for 99% of the total sales income of our company. 97 Ⅹ Main item notes of the financial statement of the parent company (continued) (3) Operating revenue and operating cost (continued) (b) Other business income and other business cost 2007 2006 Other business Other business Other business Other business cost income income cost RMB thousand RMB thousand RMB thousand Yuan RMB thousand Yuan Yuan Yuan Income from 35,015 17,100 32,592 656 trusteeship and labor service Income from using 2,505 - 1,448 - of gas Training income 589 298 2,395 - 38,109 17,398 36,435 656 (4) Investment income 2007 2006 RMB thousand Yuan RMB thousand Yuan The dividend calculated according to cost method, and declared to release by the invested company 137,845 19,742 Ⅺ Relations and transactions with associated parties (1) Parent company and subsidiary Any shareholder of our company has not held the share of up to 50% and fails to form the controlling relation with our company through other ways, so our company has no parent companies. See Notes VI for the basic situation and relevant information of the subsidiary. (2) The properties of the associated parties without controlling relation Name of associated parties Relation with this group Shenzhen Energy Group Co., Ltd. Shareholder Company's directors and other senior executives Key administrative staff 98 XI． Related Party Relationship and Transactions (Continued) (1) Related Transactions –the Group (a) Emoluments of key Management Personnel In the year 2007 In the year 2006 RMB (thousand Yuan) RMB (thousand Yuan) Emoluments of key Management Personnel 6,907 3,984 (2) Balances of receivable and payables for the related parties –the Group (a) Other Payables In the year 2007 In the year 2006 RMB (thousand Yuan) RMB (thousand Yuan) Energy Group 1,190 1,205 As of December 31st, 2007, the Group’s payables to related parties account for 0.2% of the total amount of payables (as of December 31st, 2006: 1.7%). (3) Related Transactions – the Parent Company The price of the fuel purchase by the company from affiliated companies is determined by taking the reference to the market price, and the warehousing rental fee paid for related parties and collected service revenue are determined in accordance with the prices agreed by the two sides in the contract, the fund possession cost charged for related parties shall be determined by taking reference to market borrowing rate. (a) Procurement of fuel In the year 2007 In the year 2006 RMB (thousand Yuan) RMB (thousand Yuan) Shenzhen Server Petrochemical Supplying Co., 1,029,336 909,807 Ltd In 2007, the fuel procured by the company from related parties accounts for 74% of the total amount of procured fuel (2006: 62%). XI． Related Party Relationship and Transactions (Continued) (5) Related Transactions – the Parent Company (Continued) (a) Providing labor services 99 In the year 2007 In the year 2006 RMB (thousand Yuan) RMB (thousand Yuan) New Electric Power 37,520 34,040 Engineering Company 589 166 38,109 34,206 In 2007, the revenue from the labor service provided by the company for the related party account for 100% of the total service income (In 2006: accounting for 94%). (b) Providing funds In the year 2007 In the year 2006 RMB (thousand Yuan) RMB (thousand Yuan) New Electric Power 508,321 937,462 Zhongfa Power 472,684 - Shenzhen Nanshan Power Station Co., Ltd (Zhongshan) 220,354 2,341 Engineering Company 909 961 Weimei power 12,032 10,005 Zhongshan Power Plant 517 - 1,214,817 950,769 In 2007, the fund provided by company for related party accounts for 100% of the total amount of the company’s external funding (in 2006: accounting for 100%). (b) Agent Collection of Electricity Charges In the year 2007 In the year 2006 RMB (thousand Yuan) RMB (thousand Yuan) New Electric Power 814,138 733,462 In the year 2007, the amount of electricity charges collected by the company for related parties accounts for 100% of the total amount of electricity charges collected by the company acting as agent (in 2006: accounting for 100%). XI． Related Party Relationship and Transactions (Continued) (5) Related Transactions – the Parent Company (Continued) (c) Other Related Parties Collecting Heat Charge for the Company In the year 2007 In the year 2006 100 RMB (thousand Yuan) RMB (thousand Yuan) New Electric Power 32,255 45,245 In the year 2007, the amount of heat charge collected by other related parties for the company accounts for 100% of the total amount of heat charge of the company (in 2006: accounting for 100%). (d) Collecting the Fund Possession Cost In the year 2007 In the year 2006 RMB (thousand Yuan) RMB (thousand Yuan) Zhongfa Power 863 - Shenzhen Nanshan Power Station Co., Ltd (Zhongshan) 1,884 - Engineering Company 278 618 Weimei power - 2,938 3,025 3,556 In 2007, the Company related to the amount of funds used to collect the fees charged for the amount of funds used for the 100% (2006: 100%). (e) Payment of Warehousing Rental Fee In the year 2007 In the year 2006 RMB (thousand Yuan) RMB (thousand Yuan) Shenzhen Server Petrochemical Supplying Co., 27,177 28,015 Ltd In the year 2007, the warehousing rental fee paid by the company to the related party accounts for 88% of the total amount of leasing fee of the company (in 2006: accounting for 80%). XI． Related Party Relationship and Transactions (Continued) (5) Related Transactions – the Parent Company (Continued) (f) To Provide Security for the Bank Loans and Notes Payable of Related Party In the year 2007 In the year 2006 RMB (thousand Yuan) RMB (thousand Yuan) Shenzhen Nanshan Power Station Co., Ltd (Zhongshan)－Bank Loans 621,000 116,000 Weimei power－Bank Loans 336,000 110,000 －Notes Payable 17,705 - 101 Shenzhen Server Petrochemical Supplying Co., Ltd－Bank Loans 136,698 15,288 －Notes Payable 30,000 - 1,141,403 241,288 In the year 2007, the guaranteed amount provided by the company for the related party accounts for 100% of the total amount of the company's external guarantee (in 2006: accounting for 100%). (4) Balances of receivable and payables for the related parties ––the Parent Company (a) Payables As of December 31st, As of December 31st, 2007 2006 RMB (thousand Yuan) RMB (thousand Yuan) Payables of Fuel Procurement to Shenzhen Server Petrochemical Supplying Co., Ltd 43,186 9,664 As of December 31st, 2007, the company’s payables to the related parties accounts for 88% of the total amount of the company’s payables (as of December 31st, 2006: accounting for 75%). (b) Other receivables As of December 31st, As of December 31st, 2007 2006 RMB (thousand Yuan) RMB (thousand Yuan) the receivable temporary loading of Shenzhen Nanshan Power Station Co., Ltd (Zhongshan) 69,579 2,341 the receivable temporary loading of Zhongfa Power(Note 1) 473,547 - the receivable current account of Engineering company 2,133 13,975 the receivable temporary loading of Zhongshan Power Plant 517 - the receivable temporary loading of Weimei Power - 59,312 545,776 75,628 As of December 31st, 2007, the company’s receivables to related parties accounts for 99% of the total amount of receivables (as of December 31st, 2006: accounting 67%). Note 1: The receivable temporary loading of Zhongfa Power is mortgaged with the land-use right about 632.265 million Yuan (with the original price of 638.661 million Yuan). XI． Related Party Relationship and Transactions (Continued) (5) Balances of receivable and payables for the related parties —the Parent Company (c) Other payables 102 As of December 31st, As of December 31st, 2007 2006 RMB (thousand Yuan) RMB (thousand Yuan) the receivable current account of New Electric Power 366,480 249,853 the receivable current account of Energy Group 1,190 1,205 the receivable current account of Shenzhen 3,456 3,458 Server Petrochemical Supplying Co., Ltd 371,126 254,516 On the December 31, 2007, the company’s payables to related parties accounts for 99% of the total amount of payables (as of December 31st, 2006: accounting 96%). XII Commitments (1) Capital Commitments The following is date of balance sheet, capital expenditure commitments that have been signed but yet not been recognized in the financial statements: As of December 31st, As of December 31st, 2007 2006 RMB (thousand Yuan) RMB (thousand Yuan) House, buildings and machine equipment 12,535 152,430 (2) Commitments on Operating Lease According to the signed irrevocable operating lease contract, the future minimum rental payment is summarized as follows: As of December 31st, As of December 31st, 2007 2006 RMB (thousand Yuan) RMB (thousand Yuan) Within one year 33,629 7,303 within 1 to 2 years 1,327 5,203 within one to three years 1,375 1,327 More than three years 71,748 73,123 108,079 86,956 XIII Contingent liability As of December 31st, 2007, the Group’s land use rights (Note VII (8)) with the net value of about 158.717 million Yuan (original price 159.516 million Yuan) and the machine equipment (Note VII( 6) ) with the value of 30.894 million Yuan (original price 32.3074 million Yuan) are used as the mortgage for bank loan of 129.9 million Yuan for the electric 103 power development. XIV First Implementation of Accounting Standards for Business Enterprises The Merged Shareholders Equity in the beginning and the end of 2006 that is listed and reported in accordance with original Accounting Standard and Accounting System, 2006’ combined net profit will be adjusted to be the Merged Shareholders Equity and combined net profit listed and reported in accordance with Accounting Standards for Business Enterprises, the adjusted items are as follows: On January 1, 2006 2006’ As of December Merged Combined net 31st, 2006 Shareholders profit Merged Equity Shareholders Equity RMB (thousand RMB RMB (thousand Yuan) (thousand Yuan) Yuan) the amount listed and reported in 1,525,373 63,466 1,587,157 accordance with original Accounting Standard and Accounting System minority stockholder's interest / profit 172,898 (5,500) 207,895 and loss transfer The increase in the merge scope - (730) (730) Other - 56 56 the amount listed and reported in 1,698,271 57,292 1,794,378 accordance with Accounting Standards for Business Enterprises The Company implemented Accounting Standards for Business Enterprises for the first time on January 1, 2007, and the Shareholders Equity on January 1, 2007 that had been adjusted in accordance with Accounting Standards for Business Enterprises was disclosed in Reconciliation Statement of New and Old IAS Differences in the Interests of the Shareholders in 2006’Annual Report. In the preparation of the financial statements, the company conducted review on the book balance of assets, liabilities and owner's equity projects related to the date of initial implementation in accordance with the requirements in Accounting Standard for Business Enterprises No. 1, and made the following amendments on the Shareholders Equity on Jan. 1, 2007: Reason for amendme 2007 2006 Difference nt The amount The amount after annual disclosed in amended annual report RMB RMB RMB (thousand (thousand (thousand Yuan) Yuan) Yuan) 104 the amount listed and reported in accordance with original Accounting Standard and Accounting System 1,587,157 1,587,157 - minority stockholder's interest transfer 207,895 207,895 - change in Minority Shareholders' Rights and Interests due to the increase in the merge scope (730) - (730) (1) other 56 56 - the amount listed and reported in accordance with Accounting Standards for Business Enterprises 1,794,378 1,795,108 (730) XIV First Implementation of Accounting Standards for Business Enterprises (continued) (1) Reasons for amendment: As an A shares and B shares listed company, the company needs to conduct retroactive adjustment in accordance with the stipulations in Accounting Standard for Business Enterprises No.1. The non-continuous operating subsidiary with negative owner’s equity should be included into the merge scope and correspondingly reduce the rights and interests of minority shareholders. XV The Net Profit Deducted from the Non-recurring Profit and Loss In the year 2007 In the year 2006 RMB (thousand Yuan) RMB (thousand Yuan) Net profit 97,546 57,292 Minus：income from non-current asset disposal (14,733) (3,226) The difference between the consolidation costs and the fair value share of the consolidated enterprise’s identifiable net assets that is obtained from the consolidation. (89,065) - Other Net Non-operating Income and Expenditure 713 (2,137) The fund possession cost charged from non-financial enterprises - (2,942) Income tax effect of Non-recurring Profit and Loss - 421 Net Loss / profit After Deducting Non-recurring Profit and Loss (5,539) 49,408 Attribute to the shareholders of parent company 15,201 55,753 Minority Shareholders' Rights and Interests (20,740) (6,345) (1) The Foundation of Formulating the Statement of Non-recurring Profit and Loss According to the provisions in “ Question and Answer No.1 Concerning the Regulations on 105 Information Disclosure of the Companies Offering Securities to the Public — Non-recurring Profit and Loss” , non-recurring profit and loss refers to the profit and loss that has no direct relationship with the operating business or the profit and loss generated from various transactions and matters that can normally reflect the operation and profit-making ability but suffer the influence from their nature, amount or occurrence frequency although the profit and loss is relevant to operating business. 106 Attachment: Statement on Provision for the Devaluation of Asset Prepared by Shenzhen Nanshan Power Co., Ltd. Dec.31, 2007 Unit: RMB Withdrawal Decrease in this period Book balance Book balance Items amount in this in year-begin Transfer-in Transfer-out in period-end period I. Total of provision for bad debts 36,979,000.00 4,645,000.00 41,624,000.00 II. Provision for falling price of 6,844,000.00 6,844,000.00 inventory III. Provision for devaluation of financial asset available for sales IV. Provision for devaluation of held-to-maturity investment V. Provision for devaluation of 2,500,000.00 2,500,000.00 long-term equity investment VI. Provision for devaluation of investing property VII. provision for devaluation of 25,668,000.00 25,668,000.00 fixed assets VIII. Provision for devaluation of engineering materials IX. Provision for devaluation of construction in progress X. Provision for devaluation of productive biological asset Including: Provision for devaluation of mature productive biological asset XI. Provision for devaluation of oil asset XII. Provision for devaluation of 6,768,000.00 6,768,000.00 intangible asset XIII. Provision for devaluation of goodwill XIV. Other Total 53,091,000.00 30,313,000.00 83,404,000.00 Statement on Changes of Net Profit (Jan.1, 2006-Dec.31, 2006) Unit: RMB Items Before adjustment After adjustment Operating cost 4,043,041,000.00 4,046,729,000.00 Sales expense 4,658,000.00 4,658,000.00 Administration expense 90,698,000.00 88,146,000.00 Income from the change of fair 0.00 value Investment income 0.00 2,206,000.00 Income tax -2,931,000.00 -2,980,000.00 Net profit 63,466,000.00 63,133,000.00 107 Reconciliation Statement on Difference of Consolidated Net Profit Unit: RMB Items Amount Net profit as Jan.1, 2006- Dec.31, 20066(Original 63,466,000.00 Accounting Standards) Add: Total amount influenced by retroactive -333,000.00 adjustment Including: Operating cost Sales expense Administration expense Income from changes of fair value Investment income Income tax Other -333,000.00 Less: Minority shareholders’ gains and losses influenced by retroactive adjustment Net profit attributable to owners of parent company as Jan.1, 2006- Dec.31, 2006 (New Accounting 63,133,000.00 Standards) Assuming information of fully implementing New Accounting Standards for reference I. Add: Total amount influenced by other items Including: Exploitation expense Gains and losses from debts reconstruction Gains and losses from exchange of non-currency assets Investment income Income tax Other II. Add: Minority shareholders’ gains and losses influenced by retroactive adjustment III. Add: Minority shareholders’ gains and losses listed in original semi-annual financial statement Simulated net profit as Jan.1, 2006- Dec.31, 2006 63,133,000.00 108