特力Ｂ(200025)2007年年度报告（英文版）

Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告摘要 深圳市特力（集团）股份有限公司 SHENZHEN TELLUS HOLDING CO., LTD. ANNUAL REPORT 2007 April 17, 2008 1 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告摘要 Important Notes: Board of Directors, Supervisory Committee, all directors, supervisors and senior executives of ShenZhen Tellus Holding Co., Ltd. (hereinafter referred to as the Company) 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. This report has been prepared in Chinese version and English version respectively. In the event of difference in interpretation between the two versions, the Chinese report shall prevail. Chairman of the Board of the Company, General Manager, and Chief Financial Officer hereby confirm that the Financial Report enclosed in the Annual Report is true and complete. COMPANY PROFILE---------------------------------------------------------------------------------------- SUMMARY OF FINANCIAL HIGHLIGHT AND BUSINESS HIGHLIGHT------------------- CHANGES IN SHARE CAPITAL AND PARTICULARS ABOUT SHAREHOLDERS------- PARTICULARS ABOUT DIRECTORS, SUPERVISORS, SENIOR EXECUTIVES AND EMPLOYEES-------------------------------------------------------------------------------------------------- ADMINISTRATIVE STRUCTURE----------------------------------------------------------------------- BRIEF OF THE SHAREHOLDERS’ GENERAL MEETING--------------------------------------- REPORT OF BOARD OF DIRECTORS----------------------------------------------------------------- REPORT OF SUPERVISORY COMMITTEE---------------------------------------------------------- SIGNIFICANT EVENTS------------------------------------------------------------------------------------ FINANCIAL REPORT--------------------------------------------------------------------------------------- DOCUMENTS AVAILABLE FOR REFERENCE------------------------------------------------------ Section I. Company Profile 1. Legal Name of the Company in Chinese: 深圳市特力（集团）股份有限公司 Legal Name of the Company in English: ShenZhen Tellus Holding Co., Ltd. 2. Legal Representative: Zhang Ruili 3. Secretary of the Board of Directors: Ren Yongjian Contact Tel: (86) 755-83989338 Fax: (86) 755-83989399 E-mail: ryj@tellus.cn Securities Affairs Representative: Deng Shu’e 2 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告摘要 Contact Tel: (86)755-883989337 Fax: (86)755-83989399 E-mail: shuedeng@tellus.cn 4. Registered Address: the 3/F, Tellus Building, Shui Bei Er Road, Luohu District, Shenzhen Office Address: the 15/F, Zhonghe Building, Shennan Middle Road, Futian District, Shenzhen Post Code: 518031 Web site of the Company: www.tellus.cn E-mail: sztljtgf@public.szptt.net.cn 5. Newspapers Chosen by the Company for Disclosing the Information: Securities Times (Shenzhen) and Hong Kong Wen Wei Po Internet Website for Publishing the Annual Report: http://www.cninfo.com.cn The Place Where the Annual Report is Prepared and Placed: Secretariat of the Board of Directors of ShenZhen Tellus Holding Co., Ltd. 6. Stock Exchange Listed with: Shenzhen Stock Exchange Short Form of the Stock and Stock Code: Tellus-A (000025) Tellus-B (200025) 7. Other related information: (1) Initial registration date: Nov. 10, 1986 Initial Registration Place: No. 104, Shui Bei Er Road, Luohu District, Shenzhen Registration number of enterprise legal person’s business license: 19219221-0 (2) Registered number of taxation: SDS Zi 440303192192210 GS Zi 440301192192210 (3) Certified Public Accountants engaged by the Company: Shenzhen Nanfang Minhe Certified Public Accountants Address: the 8/F, Electronics Building, No. 2072 Shennan Middle Road, Shenzhen Section II. Summary of Financial Highlight and Business Highlight (I) Accounting data and financial indexes as of the year 2007 Unit: RMB Operating profit 11,478,630.24 Total profit 6,733,593.23 Net profit attributable to shareholders of the listed 10,795,254.16 company Net profit attributable to shareholders of the listed company after deducting non-recurring gains and -28,284,731.97 losses Net cash flow arising from operating activities -61,994,274.41 Net increase amount of cash and cash equivalents 30,714,048.40 Note: Items of non-recurring gains and losses deducted and the relevant amount 3 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告摘要 1.Losses/gains from the disposal of noncurrent -4,934,272.76 asset(Non-equity) 2. Losses/gains from the transferring of equity -148,909.19 3. Selling the financial asset available for sales 20,120,452.32 4. Losses/gains from the change of noncurrency asset 23,321,551.51 5. Losses/gains from debt restructuring 1,268,742.96 6. Funds occupied capital received from non-finance 76,041.64 enterprises reckoned into this period 7. Administration expense deducted by balance of 3,088,230.76 welfare payable 8. Net Non-operating income and expense -1,079,507.21 9. Non-recurring losses/gains after of minority 3,624,505.60 shareholders deducted 10 Impact on income tax -6,256,849.50 11. Subtotal amounts involved of the above items 39,079,986.13 Note: There were no differences on the results of CAS and IAS. (II) Major accounting data and financial indexes over the past three years (Unit: RMB) 2006 Increase/decrease 2005 this year Items 2007 Before compared with Before After adjustment After adjustment adjustment adjustment last year (%) Operating 991,036,624.74 1,139,756,826.12 1,139,756,826.12 -13.05 1,079,161,954.11 1,079,161,954.11 income Total profit 6,733,593.23 -87,222,546.28 -84,188,259.97 108.00 10,435,983.82 16,185,113.76 Net profit attributable to 10,795,254.16 -92,148,791.60 -87,991,436.55 112.27 5,676,304.77 11,345,662.68 shareholders of the listed company Net profit attributable to shareholders of the listed company -28,284,731.97 -7,861,349.37 -5,818,085.31 -386.15 3,759,441.57 5,178,915.29 after deducting non-recurring gains and losses 4 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告摘要 Net cash flow arising from -61,994,274.41 5,551,011.33 5,551,011.33 -1,216.81 35,943,414.04 35,943,414.04 operating activities Net cash flow arising from -0.28 0.025 0.025 -1,220.00 0.16 0.16 operating activities per share Basic earnings per 0.049 -0.4183 -0.3994 112.27 0.0258 0.0515 share Diluted earnings per 0.049 -0.4183 -0.3994 112.27 0.0258 0.0515 share Basic earnings per share after deducting -0.1284 -0.0357 -0.0264 -386.15 0.0171 0.0235 non-recurring gains and losses Fully diluted return on 6.93 -68.33 -59.80 66.73 2.51 4.87 equity (%) Weighted average 7.08 -51.25 -46.03 53.11 2.59 4.99 return on equity (%) Fully diluted return on equity after deducting -18.14 -5.83 -3.95 -14.19 1.66 2.22 non-recurring gains and losses (%) Weighted average return on equity after -18.54 -4.37 -3.04 -15.50 1.72 2.28 deducting non-recurring gains and losses (%) Total assets 835,575,307.22 830,866,309.81 844,119,585.92 -1.01 859,358,659.13 862,437,762.39 Owners’ equity(or 155,885,846.63 134,859,194.63 147,154,326.04 5.93 225,872,478.83 233,002,163.42 Shareholders’ equity) Net asset per share attributable to 0.708 0.612 0.668 5.99 1.025 1.058 shareholders of listed company 5 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告摘要 (III) Supplemental statement of profit as of year 2007 Return on equity and earnings per share are calculated according to Preparing Regulations on the Information Disclosure of Companies Publicly Issuing Securities (No. 9) released by China Securities Regulatory Commission 2007 Items Return on equity (%) Earnings per share （RMB/share） Weighted Fully diluted Fully diluted Weighted average average Net profit 6.93 7.08 0.049 0.049 Net profit after deducting the -18.14 -18.54 -0.1284 -0.1284 non-recurring gains and losses Section III. Changes in Share Capital and Particulars about Shareholders I. Changes in share capital (I) Ended as Dec.31, 2007, the stock structure of the Company was as follows: Unit: Share 6 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告摘要 Before the Changes Increase/Decrease in the Change (+, -) After the Change Issuance Proportion Capitalization of Proportion Amount of new Bonus shares Other Subtotal Amount (%) public reserve (%) shares I. Restricted 145870560 66.22 0 0 0 0 0 145870560 66.22 shares 1. State-owned 0 0 0 0 0 0 0 0 0 shares 2.State-owned legal person’s 145870560 66.22 0 0 0 0 0 145870560 66.22 shares 3. Other 0 0 0 0 0 0 0 0 domestic shares Including: 0 0 0 0 0 0 0 0 0 Domestic legal 0 0 0 0 0 0 0 0 0 person’s shares Domestic natural person’s 0 0 0 0 0 0 0 0 0 shares 4. Foreign 0 0 0 0 0 0 0 0 0 shares Including: Foreign legal 0 0 0 0 0 0 0 0 0 person’s shares Foreign natural 0 0 0 0 0 0 0 0 person’s shares II. Unrestricted 74411040 27.55 0 0 0 0 0 74411040 33.78 shares 1. RMB 48011040 15.57 0 0 0 0 0 48011040 21.80 Ordinary shares 2.Domestically listed foreign 26400000 11.98 0 0 0 0 0 26400000 11.98 shares 3. Overseas listed foreign 0 0 0 0 0 0 0 0 0 shares 4. Others 0 0 0 0 0 0 0 0 0 III.Total shares 220281600 100 0 0 0 0 0 220281600 100 Statement on changes of restricted shares Restricted Restricted Restricted Restricted Name of shares shares Reason for Date for releasing shares in shares in shareholders released increased this restricted trade restricted trade year-begin year-end this year year Restricted Shenzhen shares due to SDG Co., 145870560 0 0 145870560 Jan.4, 2009 Share Merger Ltd. Reform Yang 0 0 6000 6000 Purchased in Conforming to 7 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告摘要 Jianhui (B share) shares by the relevant supervisor policy on shares held by senior executives Total 6000 145870560 0 145876560 - - (B share) (II) Share issuance and listing 1. Particulars about issuance of share and its derivative securities in the recent three years: the Company had issued neither additional shares nor derivative securities in recent three years. 2. In the year 2006, the stock structure of the Company changed due to the implementation of Share Merger Reform. After implementing the plan, the Company’s total share capital remained unchanged. Excluded the aforesaid implementation plan, in the report period, the Company had never been involved in any events which may cause change of the total shares and the equity structure such as bonus shares, share capital converted, rationed share, additional issuance, absorption and combination, transferring convertible company bonds into shares, reduction of capital, listing of inner employees’ shares or company’s employees’ shares, etc.. 3. The company had no present inner employees’ share. (III) Particulars about the main shareholders 1. Ended Dec. 31, 2007, the Company had totally 17,898 shareholders, including 14,210 shareholders of A-share and 3,688 shareholders of B-share. 2. Ended Dec. 31, 2007, particulars about shares held by the top ten shareholders Number of Shareholders and Particulars about Shares Held Unit: Share 17,898 shareholders (including 14,210 shareholders of A-share and Total number of shareholders 3,688 shareholders of B-share) Particulars about shares held by the top ten shareholders Number of Full name of Type of Proportion Total number Share pledged non-circulation Shareholder shareholders (%) of shares held or frozen shares held SHENZHEN SDG State-owned 66.22 145,870,560 145,870,560 0 CO., LTD. shareholder KGI ASIA Other 0.65 1,439,149 0 Unknown LIMITED BOCI SECURITIES Other 0.50 1,101,292 0 Unknown LIMITED YU AI JUN Other 0.39 850,000 0 Unknown WANG CUI XIA Other 0.25 541,200 0 Unknown LIANG JING QIN Other 0.21 473,400 0 Unknown THE FISRT SHANGHAI Other 0.21 454,200 0 Unknown SECURITIES CO., LTD. ZHANG ZI BIN Other 0.20 444,839 0 Unknown YE YING Other 0.20 440,000 0 Unknown CHEN WEI JIAN Other 0.20 434,300 0 Unknown Particulars about shares held by the top ten shareholders of circulation share Numbers of circulation share Name of shareholders Type of share held KGI ASIA LIMITED 1,439,149 Domestically listed foreign shares BOCI SECURITIES LIMITED 1,101,292 Domestically listed foreign shares 8 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告摘要 YU AI JUN 850,000 RMB ordinary shares WANG CUI XIA 541,200 RMB ordinary shares LIANG JING QIN 473,400 RMB ordinary shares THE FISRT SHANGHAI 454,200 Domestically listed foreign shares SECURITIES CO., LTD. ZHANG ZI BIN 444,839 RMB ordinary shares YE YING 440,000 RMB ordinary shares CHEN WEI JIAN 434,300 Domestically listed foreign shares XU AILAN 400,000 Domestically listed foreign shares Among the top ten shareholders, there exists no associated relationship between the state-owned legal person’s shareholders Shenzhen SDG co., Explanation on associated Ltd and other shareholders, and they do not belong to the consistent relationship among the top ten actionist regulated by the Management Measure of Information shareholders or consistent action Disclosure on Change of Shareholding for Listed Companies. For the shareholders of circulation share, the Company is unknown whether there exists associated relationship or not. (III) Particulars about the controlling shareholder 1. Name of the controlling shareholder of the Company: Shenzhen SDG Co., Ltd. (state-owned shareholder) Legal representative: Liu Aiqun Date of establishment: In June 1982 Registered capital: RMB 1,582,820,000 Company type: Limited Company Business scope: development and operation of real estates, domestic trading, supply and marketing of materials (excluding monopoly products), consultant of economic information (excluding limit items), operating import and export business, industry traffic and transportation, tourism, finance and trust, issuance of securities and so on. Ended Dec. 31, 2007, the shares held by the shareholder of SDG: 43.30% equity of Shenzhen SDG Co., Ltd. was held by Shenzhen Investment Holding Co., Ltd. 2. About the controlling shareholder or actual controller the of the Company’s controlling shareholder: Name of shareholder: Shenzhen Investment Holding Co., Ltd. Legal representative: Chen Hongbo Date of foundation: Oct. 13, 2004 Registered capital: RMB 4 billion Company type: Limited Company (State-owned Sole Corporation) Business scope: providing guarantee for municipal state-owned enterprises; management of state-owned equity except for enterprises supervised by the State-owned Assets Supervision and Administration Commission of Shenzhen; assets reorganization, reformation and capital operation of enterprises; investment; and other operations authorized by Municipal SASAC. The controlling relationship between the Company and the actual controller is as follows: Shenzhen 43.30% Shenzhen 5 66.22% ShenZhen Investment SDG Co., Ltd. Tellus Holding Co., Holding Co., Ltd. Ltd. 9 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告摘要 (IV) Ended Dec. 31, 2007, the Company exist no shareholder of legal person’ share holding 10% equity (including 10%). Section IV. Particulars about directors, supervisors, senior executives and employees I. Basis information of directors, supervisors and senior executives Amount of shares Reason held for (Share) change At Names Sex Age Titles Office term the At the perio period- d-be end gin Zhang Director, Chairman of Male 44 2006.6.17-2009.6.16 0 0 - Ruili the Board Cheng Director, General Male 44 2006.6.17-2009.6.16 0 0 - Peng Manager Fu Bin Male 45 Director, CFO 2006.6.17-2009.6.16 0 0 - Li Female 42 Director 2006.6.17-2009.6.16 0 0 - Mingjun Chen Male 40 Director 2006.6.17-2009.6.16 0 0 - Baojie Luo Tao Male 45 Director 2007.8.10-2009.6.16 0 0 - Zhou Male 52 Independent Director 2006.6.17-2009.6.16 0 0 - Chengxin Shi Female 40 Independent Director 2006.6.17-2009.6.16 0 0 - Weihong Ji Dejun Male 63 Independent Director 2006.6.17-2009.6.16 0 0 - Supervisor, Chairman of Li Binxue Male 49 the Supervisory 2006.6.17-2009.6.16 0 0 - Committee Zhang Male 37 Supervisor 2006.6.17-2009.6.16 0 0 - Xinliang Guo Jian Male 42 Supervisor 2007.8.10-2009.6.16 0 0 - Yang Purchas Male 37 Employee Supervisor 2006.6.17-2009.6.16 0 6,000 Jianhui ed in Wang Male 49 Employee Supervisor 2006.6.17-2009.6.16 0 0 - Guangye Guo Deputy General Male 42 2006.6.17-2009.6.16 0 0 - Dongri Manager Deputy General Ren Male 44 Manager, Secretary of 2006.6.17-2009.6.16 0 0 - Yongjian the Board Luo Deputy General Male 45 2006.6.17-2009.6.16 0 0 - Bojun Manager Deputy General Feng Yu Male 40 2006.6.17-2009.6.16 0 0 - Manager II. Main work experience of directors, supervisors and senior executives in the recently five years and particulars about holding the post or taking part-time job in other units barring the Shareholding Company Name Main work experience and holding the post or taking part-time job 10 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告摘要 He ever took the posts of Divisional Manager of Financial Company of Shenzhen Special Economic Zone Development (Group) Company and Manager of Assets Department of Shenzhen Special Economic Zone Development (Group) Company; now, he takes the post of Chairman of the Board of the Group. At the same time, he concurrently Chairman Zhang of the Board in Shenzhen Auto Industries & Trading Corporation (the controlling Ruili subsidiaries of the Company), Chairman of the Board in Shenzhen Huari Automobile Co. Ltd. (the controlling subsidiaries of the Company), Vice Chairman of the Board in Shenzhen Renfu Tellus Automobile Service Co., Ltd. (the share-holding company of the Company) and Chairman of Shenzhen Tellus Gem Investment Co., Ltd.( the joint-stock company of the Company). He ever took the post of Director of General Office in Shenzhen Kaifeng Special Automobile Industry Co., Ltd., and successfully took the posts of Deputy Ministry and Ministry of Enterprist Management Department, General Manger and Vice Secretary of Party Committee in Shenzhen Auto Industries & Trading Corporation. He now acts as Cheng Director and General Manager of the Group. At the same time, he concurrently took the Peng post of Director of Shenzhen Auto Trading Corporation (the controlling subsidiaries of the Company), Director of Shenzhen Huari Automobile Co. Ltd. (the controlling subsidiaries of the Company) and Director of China Pufa Machinery Industry Corporation (the share-holding company of the Company). He ever took the post of lecturer in Hunan College of Finance and Economics, Business Manager of Assets Operation Department in Shenzhen SDG Co., Ltd., CFO of Shenzhen Fu Bin SDG Xiaomeisha Tourism Center. He now acts as Director and CFO of the Group. At the same time, he concurrently took the post of Director of Shenzhen Auto Trading Corporation (the controlling subsidiaries of the Company) She ever took the post of Manger of Financial Department, Employee Supervisor of ShenZhen Tellus. CFO of Shenzhen SDG Xiaomeisha Tourism Center. She now acts as Li Mingjun Director of the Group and Manager of Planning and Financial Department of Shenzhen SDG Co., Ltd. He ever took the posts of Deputy Chief Engineer of Shenzhen Changhong Communication Equipment Co., Ltd., Manager of Enterprise Management Dept. and Manager of Investment Development Dept. and Minister of Enterprise Planning Dept. of Luo Tao Shenzhen Special Economic Zone Development (Group) Company. He now acts as Director of the Group, Manager of Investment and Development Department of Shenzhen SDG Co., Ltd. At the same time, he concurrently holds the post of Director of Shenzhen SDG Information Co., Ltd. He ever took the post of inspector of Tianjin Military Procuratorate and Beijing Military Area Command Procuratorate; Deputy Director of Member Dept., Office Director of Chen Shenzhen Enterprise Confederation and Shenzhen Entrepreneur Association; Assistant to Baojie General Manger and Office Director of Beijing Youji Real-estate Development Co., Ltd. Now, he takes the post of director of the group, employee director and Secretary of Board of Directors of Shenzhen SDG Co., Ltd. 11 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告摘要 He ever took the post of Lector and Associate Professor in Law College of Wuhan University (during the period, visiting scholar of U.S.A Michigan University, further studied American Business Law and Law of International Commercial Arbitration); Deputy Director, Deputy Researcher of Law and Researcher of Institute of Shenzhen Legal System. Now, he acts Deputy Researcher of Law and Researcher of Institute of Shenzhen Legal System (Law Service Department of Shenzhen WTO Affairs Center). At the same time, he concurrently Zhou takes Intercessor of China International Economic and Trade Arbitration Commission and Chengxin social post of intercessor of Shenzhen, Zhuhai, Shanghai, Nanjing Arbitration Commission; Lawyer of Guangdong Orient Kunlun Law Firm Shenzhen Branch and part-time lawyer in Guangdong Zhong’an Law Firm; Deputy of Shenzhen 4th People’s Congress and Committee for Legal Affairs; Expert of Shenzhen Expert Consultative Committee. Now, he acts the Independent Director of the group and concurrently takes the Independent Director of Shenzhen Nanshan Power Co., Ltd, Shenzhen Chiwan Petroleum Supply Base Co., Ltd and Sanxin Glass Technology Co., Ltd. She successively took the post of Accountant in Shenzhen Sunshine Certified Public Accountants, Head of Sunshine Certified Public Accountants, as a convener of Sunshine Certified Public Accountants; she reformed the said CPA into a partnership with corporation responsibility system and acted as chief partner. She obtained certificate for Shi CPA, Certificate for Chinese Certified Assets Appraiser, Certificate for Chinese Certified Weihong Tax Agents and Certificate for Professional of Budgetary Estimation and Budget of Guangdong Province Construction Engineering. She took charge the auditing, evaluation and liquidation of all kind of enterprises early and late, and accumulated a plenty of experiences. She now acts as Independent Director of the Group. He ever took the post of GM of Shenzhen Industry Co., Ltd.; Chief Economist of Shenzhen Special Economic Zone Development (Group) Company; Chairman of Shenzhen SDG Information Co., Ltd and Shenzhen SDG Information Alcatel Fiber Co., Ji Dejun Ltd. Now, he acts the Independent Director of the group, and concurrently Independent Director of Shenzhen Century Plaza Hotel Co., Ltd and Guilin Tourism Corporation Limited. He successfully took the posts of Manager of Technology Dept. and Production Dept. of Shenzhen Shenguang Industrial Company, Business Manager of Enterprise Dept. in Shenzhen Special Economic Zone Development (Group) Company, Deputy Director of Li Technology Development Center and Deputy Manager of Investment Development Dept. Binxue of Shenzhen Special Economic Zone Development (Group) Company. Now he takes the post of Chairman of the Supervisory Committee of the Group, and concurrently acts as Secretary of Discipline Inspection Commission of the Group. He ever took the post of Manager of Financial Dept in Machinery And Equipment Import Zhang And Export Company, Deputy Manager of Shenzhen SDG Co., Ltd. Now, he acts the Xinliang supervisor of the group, Head of Audit and Supervision Dept. and concurrently the Secretary of the supervisor committee of Shenzhen SDG Co., Ltd. He ever took the posts of Soft Engineer, Project Responsible Person in Shenzhen Changhong Communications Equipments Co., Ltd; Development Dept., Enterprise Guo Jian Management Dept., Business Manager of Enterprise No.1 Division, General Manager of Enterprise No.1 Division, Deputy Minister of Enterprise Management Dept of SDG. Now, He is the Minister of Enterprise Management Department of SDG. He ever took the post of Head of Auditing Dept. and of Enterprise Management Dept., Head of Enterprise Management Department in Shenzhen Auto Industrial Trading Corporation, Manager of Planning & Financial Dept. and Employee Supervisor in Yang Shenzhen SDG Co., Ltd, at the same time, he concurrently took the post of Director of Jianhui Shenzhen SDG Tellus Property Management Co., Ltd. (the controlling subsidiaries of the Company). Due to the manoeuvre of work, he resigned his posts of Manager of Planning & Financial Dept. and Employee Supervisor. He ever took the post of Deputy General Manger of Financial Department and Deputy Wang General Manager of Auditing Department in ShenZhen Tellus Holding Co., Ltd. Now, he Guangye acts as the Manager of Auditing Department in ShenZhen Tellus Holing Co., Ltd and Employee Supervisor of the group. 12 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告摘要 He ever took the posts of Manager of Chinamarketing Department of Shanghai Pepsi Food Co., Ltd. and Assistant General Manager of the Group. He now acts as Deputy Guo General Manager of the Group. At the same time, he concurrently took the posts of Dongri Chairman in ShenZhen Tellus Automobile Service Development Co., Ltd. (the share-holding subsidiaries of the Company) and of Shenzhen Renfu Tellus Automobile Service Co., Ltd. (the share-holding company of the Company). He ever took the posts of Deputy Manager of Planning & Financial Dept. and Manager of Auditing Dept. in Shenzhen Special Economic Zone Development (Group) Company; Director and CFO in ShenZhen Tellus Holding Co., Ltd. He now acts as Deputy General Ren Manager of the Group and concurrently holds the post of Secretary of the Board. At the Yongjian same time, he concurrently takes the posts of Director of Shenzhen Auto Industrial Trading Corporation (the controlling subsidiary of the Company) and of Shenzhen Xinglong Mould Company (the share-holding company of the Company) He ever took the post of Deputy Manager of HR Dept. and Director of Human Resource Communication Training Center in Tellus Group, and Deputy General Manger of Shenzhen Auto Industrial Trading Corporation. Now he takes the post of Deputy General Manager of the Group, at the same time, he concurrently took the posts of Director of Shenzhen Auto Industrial Trading Corporation (the controlling subsidiary of the Luo Company), Director of Shenzhen Huari Automobile Co. Ltd. (the controlling subsidiaries Bojun of the Company), Chairman of the Board of Shenzhen SDG Tellus Real Estates Co., Ltd. (the controlling subsidiaries of the Company), Chairman of the Board of Shenzhen Teyao Investment Development Co., Ltd. (the controlling subsidiaries of the Company) and director of Shenzhen Tellus Gem Investment Co., Ltd( the joint-stock company of the Company). He ever took the Deputy General Manger of Shenzhen Xianke Real-estate Co., Ltd., Manager of Investment Department of China Sports Group Industry Co., Ltd.; Director to the Office of General Manger of Shenzhen SDG Co., Ltd; Supervisor of the group. Now, Feng Yu he acts as the Deputy General Manager of the group; and he concurrently took the post of director of Shenzhen Tefa Huari Automobiles Co., Ltd. (the controlling subsidiary of the Company). Note: Particulars about directors and supervisors holding the post in Shareholding Company Name of Shareholding Title in Shareholding Name Office term Company Company Manager of Planning & Li Mingjun Shenzhen SDG Co., Ltd. March, 2006 till now Financial Dept. Employee Director, Chen Shenzhen SDG Co., Ltd. Secretary of the Board of Dec., 2006 till now Baojie the Directors Manager of Investment Luo Tao Shenzhen SDG Co., Ltd. Dec., 2006 till now and Development Dept. Zhang Manager of Audit and Shenzhen SDG Co., Ltd. March, 2006 till now Xinliang Supervision Dept. Manager of Enterprise Guo Jian Shenzhen SDG Co., Ltd. Dec., 2006 till Feb., 2008 Management Dept. III. Particulars about the annual remunerations of directors, supervisors and senior executives in office at present (I) In the report period, the remuneration and welfare of directors, supervisors and senior executives taking the position in the Company were determined in accordance with the present distribution system, welfare system of the Nation and the Company and work position in the Company. As decided by the Extraordinary Shareholders’ General Meeting 2002 of the Company, the allowance of three independent directors of the Company was respectively RMB 30,000 per year. (II) In the report period, the Company has 18 directors, supervisors and senior executives in office at present, among them, 13 persons drew the remuneration from the Company. The total annual 13 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告摘要 remuneration received from the Company was RMB 2,486,700 before taxation and RMB 2,042,000 after taxation. Unit: RMB’000(after tax) Total Name Total remuneration Name remuneration Zhang Ruili 32.56 Li Binxue 27.68 Cheng Peng 30.93 Yang Jianhui 13.85 Fu Bin 24.42 Wang Guangye 13.19 Zhou Chengxin 3.47 Guo Dongri 24.42 Shi Weihong 3.47 Ren Yongjian 24.42 Ji Dejun 3.47 Luo Bojun 24.42 Feng Yu 22.36 (III) Directors and supervisors taking the position in the Company received their remuneration according to their position in the Company, Li Mingjun, Chen Baojie, Luo Tao, Zhang Xinliang and Guo Jian took the positions in the shareholding companies of the Company and drew their remuneration from these companies, while received no payment from the Company. IV. During the report period, name of directors, supervisors and senior executives elected or leaving the office and the reasons (I) In the report period, the director of the Company Mr. Xue Gang did not continue to take the post of director due to work change; the controlling shareholder of the Company Shenzhen SDG Co., Ltd recommended Mr. Luo Tao as the candidate for the directors of the 5th board of directors of the Company. On July 20, 2007, the 5th board of the Company held the 5 extraordinary meeting in which examined and approved the proposal on changing the director. On August 10, 2008, the Company held the 1st extraordinary shareholders’ general meeting, with the election in the meeting; Mr. Luo Tao was elected as the director of the 5th board of director. The relevant resolution was published in Securities Times and Hong Kong Wen Wei Po dated August 11, 2007. (II) In the report period, in according to the recommendation of the controlling shareholder of the Company Shenzhen SDG Co., Ltd, Guo Jian was recommended as the candidate for supervisor of the 5th supervisory committee; Luo Tao did not take the post of supervisor. On July 20, 2007, the 5th supervisory committee held the 8th meeting of the Company in which examined and approved the proposal on changing the supervisor. On August 10, 2008, the Company held the 1st extraordinary shareholders’ general meeting, with the election in the meeting; Mr. Guo Jian was elected as the supervisor of the Supervisory Committee. The relevant resolution was published in Securities Times and Hong Kong Wen Wei Po dated August 11, 2007. (III) The employee supervisor Yang Jianhui resigned his post of employee supervisor due to the work manoeuvre. On March 28, 2008, Enlarged Meeting of Union Committee of the Group elected Deng Shu’e as the employee supervisor of the 5th supervisory committee. The relevant resolution was published in Securities Times and Hong Kong Wen Wei Po dated April 2, 2008. V. About employees By the end of the year 20076, the Group had totally 932 on-the-job employees, including 430 production personnel, 98 salespersons, 90 technical personnel, 70 financial personnel and 148 administration personnel; the Company has 18 master, 102 bachelor, 158 persons graduated from 3-years regular college and 654 other graduated from senior higher or lower. The Company needs 14 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告摘要 bear the expenses of 458 retirees. Section V. Administrative Structure I. Administration of the Company In the report period, according to the relevant laws and regulations and standardized documents related with Administration Rules of Listed Companies newly promulgated by CSRC, the Company constantly perfected the administrative structure of the Company, established and consummated a set of rules and regulations to regulate the operation of the Company. According to two laws and relevant regulations issued by CSRC, the Company revised standardized documents such as Administrative Measures on Hierarchical Authorization and System of Information Disclosure. The administrative situation accord with the standardized documents related with Administration Rules of Listed Companies promulgated by CSRC. (New) In the report period, according to the requirements of Notice on Issues Concerning Campaign to Strengthen Governance of Listed Companies promulgated by CSRS on Mar.9, 2007 and Note on Issues Concerning Implement Campaign to Strengthen Governance of Listed Companies in Shenzhen promulgated by Shenzhen Securities Regulation Office, the Company made self-inspection in accordance with the relevant laws and administrative regulations such as Company Law and Security Law, and internal regulations and systems such as The Articles of Associations and Rules of Procedure for Board of Directors. After the self-inspection, the Company needed further intensify and perfect in the following respects: (I) All the regulations and systems remained to perfect and standardize further: 1. According to the regulation of Guidance To Listed Company Internal Control promulgated by Shenzhen Stock Exchange, the Company should further intensify the internal management, manage to find out the weakness of the internal control system timely, seriously reform, plug up loopholes and efficiently improve ability of risk prevention, and also should regularly inspect and evaluate the completion and rationality of the internal control system and validity of its implementation. 2. Revise Management System of Information Disclosure Affairs in accordance with Information Disclosure Management Bylaws of Listed Companies issued by CSRC; 3. Formulate Internal Report System for Significant Information in order to definitely regulate the process of reporting, sending, auditing and disclosing significant events; 4. The current systems in some companies needed to be revised according to the relevant regulations and actual current situation of the Company; 5. The controlling shareholders needed require companies regularly send financial statement before disclosing. According to the relevant regulations ofstate and local state-owned assets supervision, in order to perform the obligation of managing state-owned assets, the controlling shareholders required nominated main directors to solicit their opinions before auditing some significant events by Board of Directors and report some significant events to the controlling shareholders or ask them for instructions with the form of property right representatives report. The situation hereinbefore did not accord with the fair principle of information disclosure. (II)The special committees of the Company only established Remuneration and Examination Management Committee. (III)The management of investors’ relation only remained the state of passive communication, which lacked activeness when communicate with all the supervisory and management departments and the investors. (IV)The situation of individually reporting information to the controlling shareholders in respect of information disclosure remained to standardize. According to the said deficiency, the Company reform is as follows: (I) In respect of regulations and systems The Company has revised the relevant regulations of standard systems such as The Articles of 15 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告摘要 Association, Rules of Procedure for Shareholders’ Meeting, Rules of Procedure for Board of Directors, Rules of Implementation and Procedure for Supervisory Committee and Information Disclosure Management Bylaws of Listed Companies. The Company is arranging and assembling the current systems according to the relevant regulations and actual situations of the Company, and will revise the systems and parts of items which was formulated for a long time or did not accord with actual demand of the Company as soon as possible. (II) In respect of special committees of Board of Directors According to the actual demand of the Company operation, the Company has held the thirteenth temporary meeting of the fifth Board of Directors on Jan.25, 2008, which established Audit Committee of Board of Directors, and has adjusted the commissaries in Remuneration Committee of Board of Directors in accordance with actual situation. The Company will gradually establish relevant special committees, further perfect and fully exert the function of special committees of Board of Directors. (III) In respect of management of investors’ relation Because of the limitation of objective conditions and environments, in respect of management of investors’ relation, the Company will guarantee the telephones of Secretary of Board of Directors and Representatives of Security Affairs freely connected in working hours. At the same time, the Company will fully take advantage of the platform of the Company web site（www.tellus.cn）to widen ways of communication with investors, and welcome investors to express opinions and suggestions in respect of management of investors’ relation in this way. (IV) In respect of information disclosure Strictly according to the requirements of Notice Concerning Strengthening Supervisory and Management of Providing Unopened Information to Majority Shareholders and Actual Controllers in Listed Companies Issued by Shenzhen Security Regulatory Office (SZJGSZ[2007]No.11) and Supplement Notice Concerning Strengthening Supervisory and Management of Nonstandard Behavior of Providing Unopened Information to Majority Shareholders and Actual Controllers in Listed Companies Issued by Shenzhen Security Regulatory Office (SZJGSZ[2007]No.39), the Company will report unopened information to majority shareholders after audit and approval of Board of Directors, strictly control the range of insiders, and report to Shenzhen Security Regulatory and Shenzhen Stock Exchange. At the same time, according to the requirements of No.39 Notice, the Company will issue literary commitment of insiders’ lists of reporting unopened information and commitment of strengthening management of unopened information by majority shareholders and actual controllers. II. Performance of Independent Directors: In the report period, independent directors of the Company performed their duties in line with the relevant laws and regulations, actively knew the Company’s business and operation situations and issued independent opinion to the significant events of the Company, and gave full play to active function in order to ensure the benefit of the Company and medium and small shareholders. (I) Particulars about independent directors’ presented the Board meeting: Times that Name of Times of Times of should attend Times of independent personal commission Remark the Board absence directors presence presence meeting Shi Weihong 13 11 2 0 Business Trip Zhou 13 12 1 0 Business Trip Chengxin Ji Dejun 13 13 0 0 (II) In the report period, the Company’s independent directors did not propose the objection on the relevant matters. 16 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告摘要 III. The Company is separated from the controlling shareholder in terms of Business, Personnel, Assets, Organization and Finance; the Company possessed the whole business and independent operating capability. (I) Separation in Business: The Company was an independent corporate body. The Company was absolutely independent from its controlling shareholder in business, and had an independent and complete business system and independent management capability. The Company has independent production, sales and service system and own leading industry. There exists no competition in the same line among the Company, controlling shareholders and related parties. (II) Separation in Personnel: The Company was absolutely independent in management of labor, human affairs, and salaries, enacted an independent administration systems. All the senior executives of the Company receive emoluments from the Company and have taken no post concurrently in the Shareholder Company. (III) Separation in Assets: The Company was strictly separated from its controlling shareholder, and they conducted completely independent management. The Company has complete and independent purchase system, production system, marketing system and the relevant service systems. The Company exclusively owns such intangible assets as industrial property rights, trademarks and non-patent technologies. (IV) Separation in Finance: The Company set up an independent financial accounting department, and established a complete set of accounting systems and financial administration systems. The controlling shareholder has never disturbed the Company in fund operation; The Company has opened independent bank account and has never been involved in such activities as depositing funds in the accounts of the financial company or the clearing center controlled by any of the principal shareholders or other related parties. The Company independently pays taxes according to the law. (V) Separation in Organization: The Board of Directors and the Supervisory Committee and the other inner organization operate independently. The Organizations of the Company were set up according to the standardized requirements of listed company and actual business features, and had independent office building. IV. At the end of report period, the Company’s Board of Directors evaluated senior executives aiming at work outstanding achievement according to relevant systems. V. Self-evaluation report of the Company internal control (New) According to the relevant laws and regulations and standard documents issued by CSRC and Shenzhen Stock Exchange, the Company has established and consummated legal person administrative structure including Shareholders’ Meeting, Board of Directors, Supervisory Committee and management hierarchy of the Company, and formulated relevant rules and systems. In the report period, according to the requirements of Notice on Issues Concerning Campaign to Strengthen Governance of Listed Companies promulgated by CSRS and Note on Issues Concerning Implement Campaign to Strengthen Governance of Listed Companies in Shenzhen promulgated by Shenzhen Securities Regulation Office, the Company made comprehensive and deeply self-inspection of administration and completed the self-inspection on Aug.31, 2007, and reform the relevant problems found in self-inspection seriously. On Set.1 and Oct.31, the Company disclosed self-inspection report and reform report in media appointed by CSRC respectively. (I) Main control activities 1. Control of holding subsidiaries: Strictly according to relevant laws and regulations and standard documents of listed companies, the Company managed the holding subsidiaries, and guided and standardize business performance of the holding subsidiaries in accordance with the relevant requirements. According to the relevant regulations of The Articles of Association, the Board of Directors, Supervisory Committee and legal representatives of holding subsidiaries were commended and nominated by Board of Directors of the Company, senior executives were assigned by the Company, 17 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告摘要 and established relevant Performance Appraisal System, which appraise relevant person regularly or irregularly. According to the requirements of relevant documents, the Company established a whole set of business management system, required holding subsidiaries implement in accordance with the relevant system, and at the same time required that the relevant management systems of holding subsidiaries must obey the frame of the Company management system . All functional departments of the Company also supervised all the respects such as human resource, operation, financial affairs, significant contacts and law affairs though their functional systems. Diagram for Organization Structure and Proportion of Shares Held for Controlling Subsidiary ShenZhen Tellus Holding Co., Ltd. Shenzhen Auto Industrial and Trade General Corporation Shenzhen Tellus New Yongtong Automobile Development Co., Ltd. Shenzhen New Yongtong Vehicle Testing Equipments Co., Ltd. Shenzhen Tefa Huari Automobile Enterprise Co., Ltd. Shenzhen Huari Toyota Automobile Sales Co., Ltd. Shenzhen Tefa Tellus Property Management Co., Ltd. Shenzhen Tefa Tellus Real Estate Co., Ltd. Shenzhen Zhongtian Industrial Co., Ltd. Shenzhen Tellus Real Estate Trade Co., Ltd. ︵ ︵ 100% ︵ 100% ︶ 100% ︶ ︵ ︶ ︵ 100% ︵ 60% ︵ ︶ 60% ︵ 51% ︶ ︶ 100% ︶ ︵ 100% ︶ 2. Control of connected transaction: ︶ The Company followed the principle of equity, fairness, honesty and being benefit for the Company in connected transaction, and audited in accordance with the relevant regulations and procedures to fully protect the benefits of investors. According to the relevant regulations of Rules Governing Listing of Stock on Shenzhen Stock Exchange, The Articles of Association and Administrative Measures on Hierarchical Authorization, the Company definitely divided the approval power of Shareholders’ Meeting and Board of Directors to connected transaction. Significant connected transactions should be put in Board of Directors to approve after being approved by Independent Directors. The connected transactions of the Company need relevant independent opinions expressed by Independent Directors. 3. Control of External Security: 18 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告摘要 The Company revised items related to security affairs in Administrative Measures on Hierarchical Authorization in accordance with relevant regulations of Notice On External Security By Listed Companies promulgated by CSRC and Rules Governing Listing of Stock on Shenzhen Stock Exchange. All external security affairs should implement relevant approval procedures to strengthen the management and control of external security affairs. 4. Control of collected funds use: The Company had no situation of collecting funds these years. The Company will formulate relevant management system of collected funds in accordance with actual demands. 5. Control of significant investment: Significant investments of the Company always persist in the principle of prudence, security and efficiency to significant investment, strictly control risk of investment and pay attention to maximum benefits of investment. The external investment of the Company should be fully investigated and researched by relevant department and form feasibility report on the base, and put in Board of Directors to approve after fully discussion and research by business meeting. According to relevant regulations of Rules Governing Listing of Stock on Shenzhen Stock Exchange, The Articles of Association and Administrative Measures on Hierarchical Authorization, the Company definitely divided the approval power of Shareholders’ Meeting and Board of Directors to significant investment. The Company real-time monitored the whole operation process of the investment performance in accordance with regulations of approval power in actual work. 6. Control of information disclosure: According to the relevant laws and regulations and standard documents such as Rules Governing Listing Of Stock On Shenzhen Stock Exchange and Information Disclosure Management Bylaws of Listed Companies, the Company revised Information Disclosure System in report period, which particularly regulated the principles, contents and requirements, approval procedure, responsibility and secrecy rules of information disclosure, and made clear of the responsibility and accountability system of information disclosure. The Company publicly disclosed information in relevant media appointed by CSRC, and ensured disclosing information timely and exactly. (II) Problems and reform plans 1. Problems existing in internal control of the Company and its reform (I) Relevant regulations and systems needed to be further established and perfected. The Company has revised standard system such as The Articles of Association, Rules of Procedure for Shareholders’ Meeting, Rules of Procedure for Board of Directors and Rules of Implementation and Procedure for Supervisory Committee in accordance with relevant regulations and requirements. In report period, the Company also further revised and perfected original Information Disclosure Management System in accordance with relevant regulations of Information Disclosure Management Bylaws of Listed Companies newly issued by CSRC. In addition, because some current systems were formulated for a long time, some items of them need to be revised in accordance with relevant regulations and actual current situations. At present, the Company is actively revising relevant systems. (II) The special committees of Board of Directors needed to be further established and perfected. Because of the limitation of conditions of the Company itself, the Company only established Remuneration and Appraisal Committee, not establishing other special committees. On Jan.25, 2008, the Company held the thirteenth temporary meeting of the fifth Board of Directors, which discussed and passed Rules of Procedure for Audit Committee and proposal for establishing Audit Committee of Board of Directors. The Company will establish relevant special committees of Board of Directors in accordance with actual situation, and fully exert their functions. (III) Investors management had definite passivity. Investment management of the Company remained the state of passive communication, lacking activeness in respect of communicating with all supervisory and management departments and 19 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告摘要 investors. That was because of the limitation of objective situation and environment. With the opening of the Company internet web site, the Company will take better use of the platform to strengthen management of investors’ relation, actively widen the way of communication with investors and improve investors’ approval degree of the Company. (IV) Situation of unfairly treating all the investors in information disclosure. According to the requirements of controlling shareholders, the Company needed regularly report financial statement before disclosing. Main directors nominated by controlling shareholders needed solicit their opinions before auditing some significant events by Board of Directors and report some significant events to the controlling shareholders or ask them for instructions with the form of property right representatives report. The situation hereinbefore did not accord with the fair principle of information disclosure. The Company will submit controlling shareholders to strictly restrict use range and insiders’ number of the statement, avoiding leak inside information and preventing inside transaction. 2. Non-standardized administration existed in the Company of 2007 (1) The non-standardized administration existed in the Company includes providing non-public information, sending financial budget and financial statement to its holding shareholder-SDG as well as examining and approving the external investment projects and implementing reporting system of property representative. Particulars of providing non-public information to the big shareholders in 2007 Units provided Gist for information Examine-and-approve Kind of information Time or period with sending procedure information Quick monthly report carrying the main financial index for SDG Monthly( 4th) SDG document enterprises belonging to Shenzhen City Sending via network Quarterly SDG Three expenses table SDG document ( 10th) Accounting statements and Sending via network, SDG explanation for financial Monthly( 13th) SDG document the Planning and condition Accounting Annual financial budget Department makes SDG Yearly SDG document statement for enterprise table, the Company Annual financial settlement seals and hands in. SDG Yearly SDG document statement for enterprise Other statements required by Conforming to the SDG big shareholders for handing Aperiodic SDG document requirement of in document Convention for many SDG Summary of conference Aperiodic Make a copy years, no document. SDG Annual final summary Yearly SDG document Make a copy (2) Reason accounting for the above proceeding According to the requirements of Ministry of Finance, the holding shareholders require the 20 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告摘要 Company to report periodically the financial statement before its disclosure. According to the regulation of the nation and local Committee of the State-owned Assets Supervision and Administration, in order to implement their duty to administrate the state-owned assets, the shareholders require the main directors nominated by them to consider their opinion before the Board examining and approving some significant events by way of reporting system of property representative. This requires the Company to report the significant events to the holding shareholders or ask for instructions from them. (3) Affect received by the independence of the Company Asking for instruction from shareholders for the significant events occurred in the operating activities of the Company do has brought affect to the independence of the Company. (4) Solve plan The Company received the notice from its holding shareholder-SDG by telephone: in order to carry out the reform demand for Tellus Group presented by Shenzhen Securities Regulatory Committee, SDG agreed that Tellus Group would never hand in the Property Representative Report and Summary of Conference to SDG any longer. At the same time, according to the demands of Notice on Strengthening Supervision and Administration for Listed Company Providing Non-public Information to Big Shareholder and Actual Controller (SZJGSZ (2007) No.11) and Complementary Notice on Strengthening Supervision and Administration for Listed Company’s Non-standardized Administration Such as Providing Non-public Information to Big Shareholder and Actual Controller (SZJGSZ (2007) No.39) promulgated by Shenzhen Securities Regulatory Committee, as to the significant events which would ask for instruction and report from bid shareholders, should be agreed by the examination and approval from the board of directors, and the scope of people who know it should be strictly controlled, meanwhile, the relevant data should be reported to Shenzhen Securities Regulatory Committee and Shenzhen Stock Exchange. According to the demand of No.39 document, SDG issued Commitment on Strengthening Management of the Non-public Information and Personnel List of SDG Contacting the Non-public Information of Listed Company dated Dec 11th of 2007, it made commitment to strengthen the management of non-public information. 3. General evaluation on the internal control of the Company The board of directors of the Company holds that: the already-established internal control system of the Company basically comply with the demands of Guidance for Internal Control promulgated by Shenzhen Stock Exchange and standardized documents of relevant supervisory departments. With proving from the actual operation of the Company, there is no material limitation in aspect of rationality and effectiveness. However, the internal control is a system project which lasts for a long time, with changes in internal environment, macro environment and various policy and laws, the Company will timely complement and perfect the internal control system according to the relevant requirements, assuring that the internal control system will play supervisory and promoting effect for the healthy development of the Company and further protect the practical interest of its shareholders. 4. Opinion on the self-evaluation of the internal control system of the Company issued by the Supervisory Committee The Supervisory Committee examined and discussed self-evaluation report of the internal control system of the Company, and held that self-evaluation of the internal control system of the Company comply with the demands of Guidance for Internal Control of Listed Company promulgated by Shenzhen Stock Exchange. The scheme of special administration activity made during the report period is reasonable and effective. Through self-inspection, public criticize and check from 21 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告摘要 Shenzhen Securities Regulatory Committee, the problems existed in the internal company have been found and reformed timely and completely. The Company completely disclosed the situation to the public investors in written way, guaranteeing that the establishment and implementation of the internal control system of the Company is in accordance to the demands of laws and regulations, which promises a normal operation for the Company. 5. Opinion on the self-evaluation of the internal control system of the Company issued by the independent directors Being the independent directors of Shenzhen Tellus Holding Co., Ltd, we made the following independent opinions on the self-evaluation of the internal control system of the Company according to relevant regulations and the Working System for Independent Directors of the Company: We hold that: the internal control system of the Company is comparatively complete, and the various systems all comply with demands presented by the national laws, regulations and supervisory department. The internal control conducted by the Company over the subsidiaries, related transaction, external guarantee, significant investment and information disclosure is strict, complete and effective. Every system is executed completely, complying with the demands and needs for the present management and development of the Company and assuring the operation activity of the Company is carried out normally and in order. The self-evaluation of the internal control system of the Company complies with the actual condition of the internal control of the Company. Section VI. Brief of the Shareholders’ General Meeting During the report period, the Company held one 2006 Annual Shareholders’ General Meeting and one 2007 Provisional Shareholders’ General Meeting. I. 2006 Annual Shareholders’ General Meeting The Board of Directors of the Company published the notification on holding 2006 Annual Shareholders’ General Meeting on the designated newspapers namely Securities Times and Hong Kong Wen Wei Po dated Mar 30th of 2007. On May 18th of 2007, the Company held the 2006 Annual Shareholders’ General Meeting of ShenZhen Tellus Holding Co., Ltd. at the meeting room of the Company on 15/F, Zhonghe Building. The Public Notice on Resolutions of the 2006 Annual Shareholders’ General Meeting was published respectively in Securities Times and Hong Kong Wen Wei Po dated May 19th of 2007. II. The 1st Provisional Shareholders’ General Meeting of 2007 The Board of Directors of the Company published the notification on holding the 1st Provisional Shareholders’ General Meeting of 2007 on the designated newspapers namely Securities Times and Hong Kong Wen Wei Po dated Jul 25th of 2007. On Aug 10th of 2007, the Company held the 1st Provisional Shareholders’ General Meeting of 2007 of ShenZhen Tellus Holding Co., Ltd. at the meeting room of the Company on 15/F, Zhonghe Building. The Public Notice on Resolutions of the 1st Provisional Shareholders’ General Meeting of 2007 was published respectively in Securities Times and Hong Kong Wen Wei Po dated Aug 11th of 2007. Section VII. Report of the Board of Directors I. Operating review of the Company in the report period In 2007, the Company realized operating income amounting to about RMB 991.04 million in the whole year, down 13.03 percent compared with last year and the reason for decrease was that the incline in sales amount of automobiles. In the report period, the total profit realized by the Company was RMB 6,730,000; the net profit attributable to owners of parent company was RMB 10,800,000. The main resources of the net profit in this year were non-recurring losses and gains; the current profit-gaining ability of the Company needed to be improved. 22 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告摘要 (I) The overall operation of the Company in the report period 1. In the report period, the operating income of the Company amounted to RMB 991.04 million, decreasing 13.03% compared with the same period of last year, which was mainly owing to the decreasing sales of automobiles. During the report period, the Company has realized net profit attributable to owners of parent company with RMB 10.8 million, which mainly due to the income of RMB 20.12 million obtained from selling the stock of Shanghai Raw Water. 2. Main problems and difficulties existed in the Company (1) Difficulties in automotive after-market business. Due to the sufficient fund input of the Company, the chain business of automotive after-market service makes a comparatively slow progress and hardly makes contribution for the profit of the Company in short term. Besides, some individual holding enterprise makes unsatisfying profit in automobile repair service when facing the more and more keen competition in the market. (2) Difficulties in business of house property and real estate. In recent years, we have been always seeking for reform on some self-owned property and made some preparation work in prior period. Cooperation and development work for part property has received practical progress, but due to the uncertain elements existed in cooperation and development work for property and the long period for development, so there are uncertain elements for profit contribution of the Company in recent time. (3) Capital problem. In the report period, the capital situation of the Company has been improved than previous years, but from the consideration for development, this problem is still severe. . (II) Scope of main operations and particulars about business in the report period 1. Scope of main operations and particulars about business The Company was mainly engaged in automobile inspection and maintenance, automobile trade and lease service etc. (1) In the report period, the Company’s income from operations and gross profit from operations was RMB 991.04 million and RMB 109.75 million respectively. The Company’s income from main operations was RMB 958 million, the gross profit from main operation was RMB 83,730,000, income from other business was RMB 33,040,000 and profit from other business was RMB 26,020,000. The profit from main operations was classified as follows according to industries: Unit: RMB Income from main Cost of main Profit rate of main Industries operations operations operations (%) Automobile inspection 69,025,439.62 56,581,706.75 18.03 and maintenance Automobile trade 806,834,650.30 780,396,983.56 3.28 Lease service 82,144,412.01 37,294,379.30 54.60 (2) The operating activities of the Company’s business or main products taking over 10% in total amount of income from main operations or profit from main operations: Unit: RMB Increase or Increase or Increase or Profit decrease of decrease of decrease of rate of main main main Income from Cost of main Products main operating operating operating main operations operations operati income over cost over profit rate ons (%) that of last that of last over that of year% year% last year(%) Automobile 69,025,439.62 56,581,706.75 18.03 -2.96% 8.75% -8.82 inspection 23 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告摘要 and maintenance Automobile 806,834,650.30 780,396,983.56 3.28 -18.24% -17.85% -0.45 trade Lease service 82,144,412.01 37,294,379.30 54.60 8.50% 8.24% 0.11 2. Main suppliers and customers of the Company In the report period, the Company’s total purchase amount from the top five suppliers was RMB 700 million, accounting for 90% in total purchase amount in the whole year. The Company’s main sales customers were terminal consumers and the sales income from the top five customers occupied no more than 3% in the income from main operations. 3. In the report period, there was no great change in the Company’s main operations and their structure and capability of main operations. (III) In the report period, particulars about the great change situation in the Company’s assets structure, operating expense, administrative expense, financial expense and income tax compared with the same period of last year and the main influencing factors: 1. In the report period, particulars about the great change situation in the Company’s assets structure compared with the same period of last year and main influence factors: Unit: RMB Proportion in Proportion in total Items Dec.31, 2007 Dec.31, 2006 total assets（%） assets（%） Accounts receivable 32,083,208.51 3.84 28,265,819.96 3.35 Inventory 71,001,329.38 8.50 93,430,348.73 11.07 Long-term equity 177,712,541.66 21.27 145,581,807.43 17.25 investment Real estate investment 130,294,651.25 15.59 139,738,988.07 16.55 Fixed assets 203,865,355.53 24.40 230,629,562.54 27.32 Short-term loans 258,131,109.01 30.89 224,318,670.55 26.57 Long-term loans 20,000,000.00 2.39 -- -- (1) The Company and Shenzhen Gem Jewelry Co., Ltd jointly invested and set Shenzhen Tellus Gem Investment Co., Ltd, and each holds 50% equity. The registered capital of Shenzhen Tellus Gem Investment Co., Ltd is RMB 56,704,960, among which RMB 28,352,480 is invested by the Company with the No.2 and No.3 workshops located in western Shuibei Industry Zone, Beili North road, Luohu district of Shenzhen, which made the proportion of long-term equity investment taking in the total assets increased over the same period of last year. (2) The Company took the evaluated price of its No.2 and No.3 workshops (net amount is RMB 4.1 million) located in Tellus Shuibei Industry Zone to join share of Shenzhen Tellus Gem Investment Co., Ltd, Biaoyuan Company disposed the exhibit hall of its head office in Binhe road( backout required by the municipal government) with the net book value of RMB 6.13 million and the normal calculation for depreciation, which made the proportion of real estate investment and fixed assets taking in the total assets decreased over the same period of 24 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告摘要 last year. 2. In the report period, particulars about the great change situation in the Company’s operating expense, administrative expense, financial expense and income tax compared with the same period of last year and main influencing factors: Unit: RMB Increase/decrease Items 2007 2006 Increase/decrease (%) Sales expense 40,257,190.01 48,772,458.41 -8,515,268.40 -17.46 Administrative 51,731,617.50 52,169,747.36 -438,129.86 -0.84 expense Financial expense 13,823,336.70 11,594,403.24 2,228,933.46 19.22 Income tax 107,824.99 －279,876.39 387,701.38 138.53 Increase in interest for borrowing brings an increase in financial expense compared to that at the same period of last year. (IV) Particulars about structure of cash arising from operating activities, investing activities and financing activities of the Company, change situation and reasons: Unit: RMB Increase/decrease Items 2007 2006 Increase/decrease (%) Net cash flows arising from -61,994,274.41 5,551,011.33 -67,545,285.74 -1,216.81 operating activities Net cash flows arising from 62,745,668.16 3,467,030.89 59,278,637.27 1,709.78 investing activities Net cash flows arising from 29,996,290.14 -39,385,726.44 69,382,016.58 176.16 financing activities (1) Settlement method of the Company’s auto sales is mainly bank acceptance. Net cash flows arising from operating activities has decreased greatly due to timeliness difference. (2) Purchase settlement method of the Company’s auto sales is mainly stored in bank by fixed deposit (pledged fixed deposit of RMB 32.5 million has been called back for this year), taking back the cash by selling the shares of Shanghai Raw Water amounted to RMB 22,880,000 and that the subsidiary- Shenzhen Auto Industries Trading Corporation transferred the equity of Shenzhen Biaoyuan General Motors Co., Ltd, which bring a great increase in net cash flows arising from investing activities. (V) Operations and achievements of main holding companies and share-holding companies In the report period, the main holding and share-holding companies of the Company were: Shenzhen Auto Industries Trading Corporation (hereinafter referred to as Auto Industrial Trading), ShenZhen Tellus New Yongtong Automobile Development Co., Ltd. (hereinafter referred to as New Yongtong Company), Shenzhen SDG Huari Automobile Co. (hereinafter referred to as Huari Automobile), Shenzhen Huari Toyota Auto Sales Co., Ltd. (hereinafter referred to as Huari Auto Trading), Shenzhen New Yongtong Motor Vehicle Inspecting Equipments Company (hereinafter 25 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告摘要 referred to as Inspecting Equipments),.Shenzhen SDG Tellus Property Management Co., Ltd. (hereinafter referred to as Property Company), Shenzhen SDG Tellus Real Estate Co., Ltd. (hereinafter referred to as Real Estate Company), Shenzhen Zhongtian Industrial Co., Ltd. (hereinafter referred to as Zhongtian Company), Shenzhen SDG Tellus Real Estate Co, Ltd. (hereinafter referred to as Real Estate Company) and Shenzhen Tellus Real Estate Trade Co, Ltd. (hereinafter referred to as Trade Company). The main operations and business of the aforesaid holding enterprises was as follows: Unit: RMB’0000 Auto New Huari Auto Inspecting Property Zhongtian Real Estate C Trade Compan Items Industrial Yongtong Trading Equipments Company Company ompany y Trading Sale of auto and Maintenance Production Lease and Development Main its Maintena of auto, and sale of Agency Sale of managemen Property of land, opera products or fittings, nce of production inspecting of real es auto t of lease ting commerci service developm auto and sale of equipments of tates properties al housing ent of real auto fittings auto estates 5,896 3,290 USD500 200 1,000 705 725 3,115 200 Registered capital 43,437 11,092 7,960 5,080 2,915 2,212 2,235 3,583 313 Total assets 17,471 6,028 4,341 683 404 1,009 1,546 1,781 293 Net assets Net profit -327 -1233 175 408 -652 347 15 -283 2 2. Particulars of the influence received by the net profit of the Company over 10% originating from the net profit of the single subsidiary or investment income of the single share-join company Unit: RMB Operating Company Operating cost Net profit income Shenzhen Huari Toyota Auto 28,897 461 408 Sales Co., Ltd Shenzhen SDG Tellus Property Management Co., 3,363 50 347 Ltd Shenzhen Renfu Tellus Auto 118,797 4,057 3,518 Service Co., Ltd The above data reflect the general operation of the three companies whose 60%, 100% and 35% equity are respectively held by the Company. II. Future development of the Company In 2008, Tellus Group will carry out its work with emphasis on the following aspects: 1. Upgrade the property reform. Make good programming of Tellus Gem Gold Jewelry Industry Park and implement the construction of the Industry Park step by step. Through upgrading the property reform and cooperating with famous manufacturers, gradually build Tellus Buxin Auto Comprehensive Service Industry Park. 2. Cultivate the leading industry and foster new profit point. Continuously perfect auto service chain business to form the standardized development pattern with sustainable development. Meanwhile, combining the develop opportunity of the national capital market, the Company enters into the capital market and realizes the industry upgrade. Accelerate the cooperation with famous auto manufacturer; carry out new auto brand business. Continuously intensify the cooperation with the 26 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告摘要 original partners and exploit new market. 3. Rationally collocate resources and continuously improve the profit-making ability. Optimize the present-owned enterprise resources, further cut down the cost, raise its competition and occupancy in market and advance the economic efficiency of the Company. 4. Intensify the power in debt restructure. On the basis of 2007, it makes full-round restructure on the present-existed debt of the Company and radically solves the problems of capital for the development of the enterprise by many ways. 5. Deal with the problems left by history. Actively face the lawsuits left by history and try the best to maintain the interest of the Company. III. After implementing the New Accounting Standards, the accounting policy and the corrections to accounting estimation of the Company are as follows: (I) In the report period, the reasons for the change of accounting policy of the Company and its influences In according to the regulations on CK [2006] No.3 Notice on Printing and Distributing Accounting Standards for Enterprises No.1 – Inventories, etc 38 items details standards promulgated by Ministry of Finance dated Feb.15, 2006, the Company began to adopt the new Accounting Standards for Enterprises since Jan.1, 2007, and certify Jan.1, 2007 as First Time Adoption conforming to the regulations on Accounting Standards for Business Enterprises from Ministry of Finance. In according to the CK [2007] No.14 Notice on Printing and Distributing No.1 Explanation to Accounting Standards for Enterprises from Ministry of Finance which regulates that while making the first annual report, the enterprise should re-check the book balance asset, liability and owners’ equity relevant to First Time Adoption of Accounting Standards for Business Enterprises; and disclose the reconciliation process of shareholders ‘equity in year-begin and the remedied items, influenced amount and its reason. The Company rechecked and remedied the Reconciliation Statement on Shareholders’ Equity conforming to the above regulations. After remedy, the Reconciliation Statement on Differences of Shareholders’ Equity as Dec.31, 2006 was as follows: Comparative Disclosure Sheet on Reconciliation Statement on Differences of Shareholders’ Equity Based on Old and New Accounting Standards Disclosure number Disclosure Explanatio No Item in 2007 annual number in 2006 Differences n on report annual report reason Shareholders’ equity on December 31, 2006 (Existing 134,859,194.63 134,859,194.63 -- Accounting Standards) 1 Balance of long-term equity Investment -- Including: Long-term equity investment balance formed by (5,922,647.15) (8,852,218.84) 2,929,571.69 Note 1 merger of enterprises under the same control Other credit balance of long-term equity investment -- calculated based on equity method 2 Investment property measured with fair value -- -- -- Prior year depreciation withdrawal due to dismantling cost 3 -- -- -- of assets Termination indemnity conformed to the acknowledgement 4 (9,013,636.92) (9,013,636.92 ) -- of estimated liabilities 5 Share-based payment - -- -- Reorganization duties conformed to the acknowledgement 6 -- -- -- of estimated liabilities 7 Enterprises merger -- -- -- Including: Book value of enterprises merger goodwill under -- -- -- the same control 27 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告摘要 Provision for impairment of goodwill withdrawn based on -- -- -- New Accounting Standards Financial asset and credit asset available for sales 8 attributable to current losses and gains with fair value 5,490,660.35 -- 5,490,660.35 Note 2 measurement and changes Financial liabilities attributable to current losses and gains 9 -- -- -- with fair value measurement and changes 10 Increased equity due to demerger of financial instrument 11 Derived financial instrument -- -- -- 12 Income tax 21,740,755.13 20,473,848.98 1,266,906.15 Note 3 13 Minority shareholders’ equity 54,378,527.09 54,799,722.84 (421,195.75) Note 4 14 Others Shareholders’ equity on January 1, 2007 (New Accounting Standards) 201,532,853.13 192,266,910.69 9,265,942.44 Note 1: In according to the regulations of Accounting Standard for Business Enterprises No. 38 - First Time Adoption of Accounting Standards for Business Enterprises, Long-term equity investment balance formed by merger of enterprises under the same control should take back the adjustment of retained profit. The differences on number in 2007 and number in 2006 was due to the scope differences on the cognizance on the subsidiaries formed by merger of enterprise under the same control. Note 2: In according to the regulations of Accounting Standard for Business Enterprises No. 38 - First Time Adoption of Accounting Standards for Business Enterprises, the Company measured the financial asset and credit asset available for sales with fair value and took back the adjustment of retained profit. Note 3: In according to the regulations of Accounting Standard for Business Enterprises No. 38 - First Time Adoption of Accounting Standards for Business Enterprises and Accounting Standard for Business Enterprises No. 18 – Income Tax, the Company recognized the temporary differences formed by the difference on book value of asset and liability and tax basis as the First Time Adoption, and respectively confirmed the deferred income tax asset, deferred income tax liabilities and relevantly adjusted and increased the shareholders’ equity amounting to RMB 21,740,755.13. Reasons for the differences on number in 2007 and number in 2006 was that the Company adjusted the rechecking of temporary differences. Note 4: It was the influences on the minority shareholders’ equity after the adjustment in accordance with the aforesaid as the First Time Adoption by the Company. (II) Basis for book recording and measure attribute for accounting element With accrual basis for booking recording, when measuring accounting element, historical cost would be adopted for measuring other elements except for the financial assets and financial liability and financial assets available for sale which need be measured by fair value and whose change are recorded into current gains and losses (details could be found in the relevant accounting policy in Statement Annotation). Items in statement which have changed the measure attributes for this year and the measure attributes they adopt for this year. When making measurement for accounting elements according to the above words, measure attributes of items in statements have not change in this report period. Items measured by fair value: Unit: RMB Proport Changes on Accounti Short Initial ion in Stock Book value at Gains in the owners’ equity ng Share form of investment equity code period-end report period in the report calculati resources the stock amount of the period on items Compa 28 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告摘要 ny financial Raw assets Promoter 600649 2,761,422.92 0.065% -- 20,120,452.32 15,858,575.24 Water available share for sale financial Merchant assets Promoter 600036 60,581.05 0.00% 3,123,319.56 0.00 1,833,955.24 Bank available share for sale Total 2,822,003.97 3,123,319.56 20,120,452.32 17,692,530.48 IV. Investments of the Company in the report period 1. In the report period, the Company had no proceeds raised through share offering or there was no such situation that the application of proceeds raised in previous period used in the report period. 2. In the report period, particulars of the significant project invested with non-raised proceeds. On Dec 11th of 2007, the Company and Shenzhen Gem Jewelry Co., Ltd(hereinafter refers to GEM Jewelry) officially signed the Cooperation Agreement, which established Shenzhen Tellus Gem Investment Co., Ltd in Shenzhen with investment from both parties. The registered capital of Shenzhen Tellus Gem Investment Co., Ltd is RMB 56,704,960, among which RMB 28,352,480 is invested by the Company with the No.2 and No.3 workshops located in western Shuibei Industry Zone, Beili North road, Luohu district of Shenzhen and GEM Jewelry invested RMB 28,352,480 with cash. Thus, each party holds 50% equity of Shenzhen Tellus Gem Investment Co., Ltd. The relevant notice has been published on Securities Times and Hong Kong Wen Wei Po dated Dec 14 th of 2007. V. Shenzhen Nanfang Minhe Certified Public Accountants Co., Ltd has issued standard unqualified Auditor’s Reports for the Company. VI. Routine work of the Board of Directors (I) Meetings held by the Board of Directors and contents of the resolutions In the year 2007, the Board of Directors of the Company held 14 meetings in total: 1. The 3rd provisional meeting of the 5th Board of Directors was held on Jan 26th of 2007 in the meeting room of the Company on 15/F in Zhonghe Building. 9 directors should have been presented at the Meeting, and actually 8 made it. Director Xue Gang entrusted director Li Mingjun to present in the meeting and execute the voting right. The Meeting examined and approved the proposal on Emending Management Method for Constructional Project; proposal on Management Method for Property Leasing and heard the working report for 2006 from the operating circle. 2. The 4th provisional meeting of the 5th Board of Directors was held on Feb 8th of 2007 by way of communication. 9 directors should have been presented at the Meeting, and actually 8 made it. The Meeting examined and approved the following proposals: agree Shenzhen Auto Industries Trading Corporation to Provide Guarantee for the borrowing of RMB 49.8 million made by Shenzhen Biaoyuan Auto Co., Ltd from Shanghai General Motors Finance Co., Ltd according to the equity proportion, so the actual guarantee Shenzhen Auto Industries Trading Corporation provided is RMB 12.56 million. Relevant public notice on resolutions of the meeting was published in Securities Times and Hong Kong Ta Kung Pao dated Feb 15th of 2007. 3. The 3rd meeting of the 5th Board of Directors was held on Mar 27th of 2007 in the meeting room of the Company on 15/F in Zhonghe Building. 9 directors should have been presented at the Meeting, and actually 8 made it. Director Xue Gang entrusted director Chen Baojie to present in the meeting and execute the voting right. The Meeting examined and approved the proposal on the 2006 Annual Report. The relevant resolution notice has been published on Securities Times and Hong Kong Wen Wei Po dated Mar 30 th of 2007. 29 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告摘要 4. The 4th provisional meeting of the 5th Board of Directors was held on Mar 29th of 2007 by way of communication. 9 directors should have been presented at the Meeting, and actually 9 made it. The relevant resolution notice has been published on Securities Times and Hong Kong Wen Wei Po dated Apr 7 th of 2007. th th th 5. The 4 meeting of the 5 Board of Directors was held on Apr 18 of 2007 by way of communication. 9 directors should have been presented at the Meeting, and actually 9 made it. The Meeting examined and approved the proposal on the 1st Quarterly Report of 2007. The relevant resolution notice has been published on Securities Times and Hong Kong Wen Wei Po dated Apr 23 th of 2007. 6. The 5th provisional meeting of the 5th Board of Directors was held on Jul 20th of 2007 in the meeting room of the Company on 15/F in Zhonghe Building. 9 directors should have been presented at the Meeting, and actually 7 made it. Director Cheng Peng entrusted director Fu Bin to present in the meeting and execute the voting right and director Xue Gang asked for leave because of business. The relevant resolution notice has been published on Securities Times and Hong Kong Wen Wei Po dated Jul 25 th of 2007. 7. The 5th meeting of the 5th Board of Directors was held on Aug 10th of 2007 in the meeting room of the Company on 15/F in Zhonghe Building. 9 directors should have been presented at the Meeting, and actually 5 made it. The Chairman of the Board Zhang Ruili went on errands; director Cheng Peng went on errands and entrusted director Fu Bin to present in the meeting and execute the voting right; and director Luo Tao asked for leave because of business and entrusted director Chen Baojie to present in the meeting and execute the voting right; independent director Shi Weihong asked for leave because of business and entrusted independent director Zhou Chengxin to present in the meeting and execute the voting right. The Meeting examined and approved the 2007 Semi-annual Report and the Summary of the Company. The Semi-annual Report has been published on Securities Times and Hong Kong Wen Wei Po dated Aug 15 th of 2007. 8. The 6th provisional meeting of the 5th Board of Directors was held on Aug 20 th of 2007 by way of communication. 9 directors should have been presented at the Meeting, and actually 9 made it. The Meeting examined and approved the proposal on changing the directors of Toyota Sales Company. The relevant resolution notice has been respectively published on Securities Times and Hong Kong Wen Wei Po dated Aug 29 th and Sep 1 st of 2007. 9. The 8th provisional meeting of the 5th Board of Directors was held on Sep 28 th of 2007 by way of communication. 9 directors should have been presented at the Meeting, and actually 9 made it. The Meeting examined and approved the proposal on reporting relevant non-public information to holding shareholders. 10. The 6th meeting of the 5th Board of Directors was held on Oct 17 th of 2007 by way of communication. 9 directors should have been presented at the Meeting, and actually 9 made it. The Meeting examined and approved the 3rd Quarterly Report of the Company. The 3rd Quarterly Report has been published on Securities Times and Hong Kong Wen Wei Po dated Oct 22 nd of 2007. 11. The 9th provisional meeting of the 5th Board of Directors was held on Oct 26th of 2007 in Sichuan. 9 directors should have been presented at the Meeting, and actually 7 made it. Independent directors Shi Weihong and Zhou Chengxin went on errands and entrusted independent director Ji Dejun to present in the meeting and execute the voting right. The Meeting examined and approved the proposal on Termination of the Cooperation Agreement between Shiquan Company and the Present Partner; proposal on Changing the Directors and Supervisors of the Subsidiary Enterprise; and proposal on the Reform Report about the Problems Found by the Inspection Institute of Shenzhen Securities Regulatory Bureau. 12. The 10th provisional meeting of the 5th Board of Directors was held on Nov 30th of 2007 by way of communication. 9 directors should have been presented at the Meeting, and actually 9 made it. The Meeting examined and approved the proposal on Recommending Directors and Supervisors for 30 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告摘要 Inspecting Equipments Company. The relevant resolution notice has been respectively published on Securities Times and Hong Kong Wen Wei Po dated Dec 5 th and Dec 14 th of 2007. 13. The 11th provisional meeting of the 5th Board of Directors was held on Dec 11th of 2007 by way of communication. 9 directors should have been presented at the Meeting, and actually 9 made it. The Meeting examined and approved the proposal on Recommending Directors and Supervisors for Subsidiary Enterprises and proposal on Establishing Tellus Gem Company. The relevant resolution notice has been published on Securities Times and Hong Kong Wen Wei Po dated Dec 14 th of 2007. 14. The 12th provisional meeting of the 5th Board of Directors was held on Dec 24th of 2007 by way of communication. 9 directors should have been presented at the Meeting, and actually 9 made it. The relevant resolution notice has been published on Securities Times and Hong Kong Wen Wei Po dated Dec 28 th of 2007. (II) Implementation of the resolutions made at the Shareholders’ General Meeting by the Board of Directors According to the resolutions approved by Annual Shareholders’ General Meeting 2006, the Board of the Company did not distribute any profit or transfer any reserve fund into share capital in 2007. (III) Summary of the duty performance of the Audit Committee of the board of directors The Audit Committee of the board of directors is constituted by 5 directors, among which 3 members are independent directors and the director commissioner is also an independent director. The Audit Committee actively carried out its work in auditing the annual report according to the relevant regulations of the Article of Association and the Discussing Principles of the Audit Committee. Before the official entrance of the certified public accountants for annual audit, the Audit Committee and the certified public accountants confirmed the work arrangement for the 2007 Annual Report audit after negotiation between the related two parties. The independent directors of the Company were handed with the work arrangement for the Annual Report audit. The Audit Committee examined the financial accounting statements made by the Company and believed that the preparation for these statements was in line with the regulations of accounting standard; the statements really reflected the operating achievement and financial condition of the Company. It was agreed to take this financial accounting statement and relevant files to hand in to the accountants for audit and the written opinion was issued. After the official entrance of the certified public accountants for annual audit, the members of the Audit Committee respectively made call inquiring for the audit progress and supervised and urged the Certified Public Accountants C., Ltd to finish the audit work in the regulated time according to the audit work arrangement, to make sure the annual report of the Company could be disclosed in time. At the same time, the Audit Committee made negotiation and communication with the certified public accountants on the problems existed in this audit. After the certified public accountants issued the initial audit opinion, the Audit Committee held 2 meetings, in which they examined the financial accounting statement again and formed written opinion and resolution on the annual financial accounting statement, summary report of the audit work and renewal of the engagement for the Certified Public Accountants C., Ltd which were finally handed in to the Board of the Company for examination. 1. The initial examination opinion on the 2007 financial accounting statement of the Company issued by the Audit Committee of the board of directors: According to the notice on Doing Well the 2007 Annual Report and Relevant Work of Listed Company promulgated by CSRC and the Discussing Principles of the Audit Committee, as the commissioner of the Audit Committee of Shenzhen Tellus Holding Co., Ltd (hereinafter referred to 31 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告摘要 as the Company), we made examination on the 2007 financial accounting statement of the Company before the official entrance of the certified public accountants for annual audit and presented the following opinion: With attitude of earnest and responsible, we made careful examination on the financial accounting statement prepared by the Company, including the balance sheet on Dec 31st of 2007, the 2007 profit and profit distribution sheet, the 2007 cash flow statement and statement of change in owners’ equity. We hold that: the preparation of the above financial statements is in line with the regulation of Accounting Standard for Enterprise and Accounting System for Enterprise; the statements really reflect the operating achievement of the Company in 2007 and financial condition of the Company at the end of 2007. It is agreed to carry out the financial audit work of 2007 taking the financial statements as the basis. 2. The second examination opinion on the 2007 financial accounting statement of the Company issued by the Audit Committee of the board of directors: Being the commissioner of the Audit Committee of Shenzhen Tellus Holding Co., Ltd, after the certified public accountants issued the initial audit opinion, we examined the financial accounting statements again and presented the following opinion: We consider that: the 2007 financial accounting statement of the Company fairly reflect the operating achievement of the Company in 2007 and financial condition of the Company at the end of 2007 in all significant aspects. The statements are real, accurate and complete and in line with the relevant regulations of CSRS, Shenzhen Stock Exchange and Accounting Standard for Enterprise. The Audit Committee has no objection over the audit opinion issued by the accountants who are in charge of the annual audit. At the same time, we request the audit organization- Shenzhen Nanfang Minhe Certified Public Accountants Co., Ltd to finish all the audit work as quickly as possible according to the general work arrangement and issue the audit report within the conventional time, to make sure that the Company could disclose its 2007 Annual Report in time. 3. Summary of the audit work conducted by Shenzhen Nanfang Minhe Certified Public Accountants Co., Ltd to the Company issued by the Audit Committee of the board of directors: According to the notice on Doing Well the 2007 Annual Report and Relevant Work of Listed Company promulgated by CSRC, it makes the following summary on the 2007 annual audit work conducted by the audit organization of the Company-Shenzhen Nanfang Minhe Certified Public Accountants Co., Ltd (hereinafter called as Nanfang Minhe): Nanfang Minhe carried out the necessary audit procedure during the audit work for the Companyand kept effective negotiation and contact with the Audit Committee. Nanfang Minhe carried out necessary negotiation with the Board, the Supervisory Committee and senior executives of the Company; carried out independent audit work in strict accordance to the regulations of independent audit standard for certified public accountant of China. The audit personnel are collocated rationally and the audit report that it issued could fully reflect the financial condition and operating achievement of the Company, and the conclusion of the audit report complies with the actual condition of the Company. During this audit work, the Certified Public Accountants Co., Ltd and accountants in charge of the audit all strictly observe the request presented by the professional morality for maintaining independence. The members of this audit team are all qualified wirh the necessary professional knowledge and characteristics and qualified for this audit. According to the audit standard for Chinese certified public accountant, the audit team acquired sufficient and adequate audit evidence for issuing audit opinion. According to the audit plan arrangement, Nanfang Minhe accomplished the audit work for the Company in time and issued standard and unqualified audit report. 4. Resolutions reached in the meeting of the Audit Committee of the board of directors: 32 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告摘要 The Audit Committee of the board of directors held meeting on Apr 11th of 2008, and the following proposals were unanimously examined and approved in this meeting, with 5 votes for agreement, 0 for denial and 0 for renunciation. (1) The 2007 Audit Report and Financial Accounting Statements; (2) Summary of the 2007 Audit Work Conducted by Shenzhen Nanfang Minhe Certified Public Accountants Co., Ltd for the Company; (3) Renewal of the Engagement of Shenzhen Nanfang Minhe Certified Public Accountants Co., Ltd as the Audit Organization of the Company for 2008. (IV) Summary of the duty performance of the Remuneration and Examination Committee of the board of directors During the report period, the Remuneration and Examination Committee of the board of directors made examination on the remuneration of the directors, supervisors and senior executives of the Company. With examination, all the members of the Remuneration and Examination Committee hold that the remuneration paid during the report period is in line with the performance-related evaluation system. The remuneration received by the directors, supervisors and senior executives of the Company is confirmed according to the relevant system of the Company. VII. Profit distribution preplan In the year 2007, the Company realized a net profit attributable to owners of parent company with RMB10, 795,254.16 and the net profit realized by the parent company was RMB 30,050,308.02 in the consolidated statement of the Company during the year 2007. And it is planned that no net profit made by the Company in 2007 would be distributed or capitalized. The undistributed profit would be used to compensate the losses of previous years. This profit distribution plan is still need to be examined and approved by the Annual Shareholders’ General Meeting 2007. The independent directors of the Company-Zhou Chengxin, Shi Weihong and Ji Dejun issued the following independent opinion on the reason that why ho cash profit distribution preplan is made this year: it is agreed of the decision of the 2007 profit distribution made by the Board of the Company and the Company is planned that no net profit made by the Company in 2007 would be distributed or capitalized. The undistributed profit would be used to compensate the losses of previous years. VII. Other events The Company did not change the newspapers designated for information disclosure in the report period. On Mar.28, 2007, the Company changed the newspaper designated for oversea information disclosure from Hong Kong Ta Kung Pao to Hong Kong Wen Wei Po, while newspaper and network for domestic information disclosure are still Securities Times and Juchao Website. Relevant public notice was published in Securities times and Hong Kong Wen Wei Po dated Mar.28, 2007. Section VIII. Report of the Supervisory Committee The Supervisory Committee held 5 meetings in total in the report period, with main contents as follows: 1. Deliberation on the significant events of the Company. Examined and approved successively were Proposals on Pledging Part Equity of Enterprise to SDG; proposal on Management Method with Classification Authorization; proposal on Working System for Information Disclosure; proposal on Reform Report about the Problems Found in Inspection by Shenzhen Securities Regulatory Bureau; Reform Report on Strengthening Special Activity for Administration of Tellus Group; proposal on Equity Transfer of Biaoyuan Company; proposal on Terminating the Cooperation with the Present Partner of Shiquan Company; proposal on Increasing Capital and Enlarging Shares of New Yongtong Inspection Equipment; proposal on Shenzhen Auto 33 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告摘要 Industries Trading Corporation Providing Guarantee for Loans of Shenzhen Auto Industries Import and Export Corporation; proposal on Shenzhen Teji Investment Co., Ltd; and proposal on Changes of Accounting Estimation of Board of Directors of Shenzhen SDG Co., Ltd. 2. Deliberation on the Board’s Work Reports, Performance Reports of the Administration Team, Quarterly and Annual Financial Reports of the Company, and the Profit Distribution Plan, etc. 3. Approval of the Work Report 2007 of the Supervisory Committee and resolutions made. During the past year, members of the Supervisory Committee had attended each meetings held by the Board as delegates, and, with the rights authorized by relevant laws, regulations and the Articles of Association, conducted surveys and supervision over the Company’s operation according to laws, the work and behaviors of members of the Board and other senior executives, etc. through the attendance as a nonvoting delegate at meetings of the Board, office meetings of General Manager and other various means. They had strictly and dutifully performed their supervisory responsibilities. Independent opinions of the Supervisory Committee on relevant events of the Company in 2007: I. Operation according to laws of the Company In accordance with the rules of relevant laws and regulations such as the Company Law, the Administration Rules of Listed Companies and the Articles of Association, etc, the Supervisory Committee of the Company had conducted supervision over the convening procedures and resolutions of the General Shareholders’ Meeting and the Board meetings, the Board’s implementation of the resolutions made by the General Shareholders’ Meeting, the work performance of the Company’s senior executives, and the management system of the Company, etc. The Committee believed that, for the current year, the operation of the Board and the administration team as well as the procedures of each resolution had all been in conformity with the Company Law, the Administration Rules of Listed Companies and the Articles of Association, and that resolutions of the General Shareholders’ Meeting could be implemented. No wrong doings against laws or regulations was detected that directors or senior executives had committed while performing their duties. II. Opinions after the inspection of the Company’s financial status The Supervisory Committee had conducted careful and prudent inspection over the financial system and financial status of the Company and believed that the Company’s inner controlling system is sound, and management is perfect. The Financial Report of this year can truly reflect the Company’s financial status and operation achievements. Shenzhen Nanfang Minhe Certified Public Accountants Ltd had issued unqualified Auditors’ Reports. III. No fund was raised in the report period. IV. During this accounting year, the Company had no significant purchases of assets, sales of asset and acquisition & merger items. V. The related transactions of the Company in the report period (I)The Company borrowed RMB 5 million from holding shareholder-SDG, with the Short-term Loan Contract regulating 2 months is the time limit (from Mar 29th of 2007 to May 29th of 2007) and the annual interest rate is 7%. This related transaction aimed to relieve the actual difficulties of fund turnover of the Company. (II) The Company borrowed RMB 5 million from holding shareholder-SDG, with the Short-term Loan Contract regulating 2 months is the time limit (from Aug 13th of 2007 to Oct 12th of 2007) and the annual interest rate is 7.5%. This related transaction aimed to relieve the actual difficulties of fund turnover of the Company. (III) The Company borrowed RMB 9.5 million from holding shareholder-SDG, with the Loan Contract regulating 1 month is the time limit (from Nov 27th of 2007 to Dec 27th of 2007) and the annual interest rate is 7.12%. This related transaction aimed to relieve the actual condition of difficult fund of the Company. 34 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告摘要 Section IX. Significant Events I.Significant lawsuits and arbitrations In the report period, the Company had some new significant lawsuits and arbitrations, with details as follows: (I) On Jul.26, 2007, the Company received notice of respondence to action (2007) YMCZ No.749, No.646, No.817, No.160 and No.766 issued by The People's Courts in Yueyang County, Hunan Province, which informed that the Company had accepted the case of the controversy over the contact of sale housing of the Company started by Zhoubin and other 315 owners of Tellus Shopping City in Chengguan Town, Yueyang County, Hunan Province. Relevant public notice was published on Securities Times and Hong Kong Wen Wei Po on Jul.30, 2007. (II) 64 owners of Tellus Shopping City, such as owner Fu Siyuan and Wu Shenbao, presented a lawsuit against Shenzhen Tellus Real Estate Yue Yang Co., Ltd.(hereinafter refers to Yueyang Company), the Company and the subsidiary of the Company-Tellus Real Estate Company as well as the holding shareholder-SDG with the same reason as above. The People's Courts in Yueyang County made the verdict with (2007) YMCZ No.10 Civil Judgment dated Dec 26th of 2007. Relevant public notice was published on Securities Times and Hong Kong Wen Wei Po Feb 18th of 2008. Explanation on the result of original significant lawsuits and arbitrations of the Company in the report period: (I) As to the case on over 40 owners, including Ji Jianjun and Zhou Linxia, of Tellus Shopping City in Yueyang suing Yueyang Company for quality problems existing in Tellus Shopping City, the Company had appealed to Yueyang Intermediate People's Courts in December of 2006, and Yueyang Intermediate People's Courts maintained the original sentence, but the Company had not received relevant judgment till now. Relevant public notice was published on Securities Times and Ta Kung Pao on Mar. 8, 2007. (II) In Oct., 2005, the Company lodged a complaint to the People’s Court of Shenzhen, Luohu District, demanding that Jintian Industry (Group) Co., Ltd repay the Company with RMB 4,081,830 (Including the principal RMB 3,000,000, the interest RMB 1,051,380, the litigation cost RMB 25,160 and the execution cost RMB 5,290. For the fund taken away, the Company had recorded as losses in previous years.) which had been deducted compulsively from the Company’s account because of the bank loan guarantee provided for it. The court pronounced that the Company won the lawsuit. Up to the disclosure date of this report, the Company applied to the court for compulsive implementation, and it was in process. (III) In Oct., 2005, the Company lodged a complaint to Shenzhen Intermediate People’s Court, demanding that Shenzhen Zhonghao (Group) Ltd repay the Company with RMB 16.62 million, mainly including the bank interest RMB 5 million for Zhonghao Company’s bank loan guarantee, and the bank loan RMB 11.5 million that the Company paid as well as the litigation cost and assessment cost RMB 120 thousand paid by the Company on its behalf (The aforesaid funds had been dealt as losses in previous years). The court pronounced that the Company won the lawsuit. Up to the disclosure date of this report, the Company applied to the court for compulsive implementation, and it was in process. (IV) As to the case on Shenzhen Shangbu Branch of Agricultural Bank of China suing Shenzhen Petrochemical Industry (Group) Co., Ltd for the overdue loan of RMB 57.6 million with guarantee provided by the Company, the Company refused to accept YGFMEZZ No.172 Civil Judgment issued by Guangdong Superior Peoples’ Court, and applied Guangdong Superior Peoples’ Court to retrial. After inspection, Guangdong Superior Peoples’ Court thought that, the application of the Company accord with the condition for placing a case on file for retrial, and Guangdong Superior Peoples’ Court will form another collegial panel to review again. Relevant public notice was published on Securities Times and Hong Kong Wen Wei Po on Feb.29, 2008. (V) As to the case on the Company’s subsidiary Tellus Real Estate Company suing Shenzhen Jinlu 35 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告摘要 Industry & Trade Company (hereinafter referred to as Jinlu Company) on the cooperated construction contract dispute, Tellus Real Estate Company and Jinlu Company both as plaintiffs sued the Branch of the Housing Administration Bureau and 75731 Army in March 2005, demanding that the two defendants implement the cooperation contract and hand over the Liyehui Food Street property amounting to 11,845 square meters (with the value totaling approximately RMB 11,851,357) to the two plaintiffs, and that the two defend compensate the plaintiffs with RMB 5,034,664.94 for the rents receivable since the year 1998. In the meantime, Tellus Real Estate Company also signed an agreement with Jinlu Company, which stated that once the Liyehui Food Street property is recovered either by voluntary implementation or compulsory execution by the court, Tellus Real Estate Company would get a fixed share of 6,000 square meters while the remaining property would be given to Jinlu Company; if the whole property did not total 6,000 square meters, Tellus Real Estate Company would have it all; and that the two parties would split the accounts receivable to be recovered 5:5. The court accepted the case. Till the disclosure of this report, the court was still hearing the case. Tellus Real Estate Company withdrew a 50% bad debt reserve for this account receivable. According to the development of the case, Tellus Real Estate Yueyang Co., Ltd. withdrew supplementary bad debt reserves RMB1, 920,000 in 2007. II. Particulars about equity of other listed companies held by the Company Unit: RMB Proport ion in Changes on Accounti Short Initial Stock equity Book value at Gains in the owners’ equity ng Share form of investment code of the period-end report period in the report calculati resources the stock amount Compa period on items ny financial Raw assets Promoter 600649 2,761,422.92 0.065% -- 20,120,452.32 15,858,575.24 Water available share for sale financial Merchant assets Promoter 600036 60,581.05 0.00% 3,123,319.56 0.00 1,833,955.24 Bank available share for sale Total 2,822,003.97 3,123,319.56 20,120,452.32 17,692,530.48 In the report period, 1.23 million tradable shares (0.065% of the total shares of Raw Water) with restricted conditions, held by the Company, of Shanghai Chengtou Holding Co. Ltd (short form of stock: Raw Water; stock code: 600649, hereinafter referred to as Raw Water) which is listed in Shanghai Stock Exchange, received qualification of coming into the market on Apr.16, 2007. In order to lock the investment benefits, considering the business demands, the Company held the 12th provisional meeting of the 5th Board of Directors in communication way on Dec.24, 2007, which discussed and passed the proposal for sales of the Raw Water shares pledged in Merchants Bank after deblocking. The Company sold up all the 1.23 million Raw Water shares on Dec.26, 2007. The accumulated realized investment benefits of the Raw Water shares’ sale was RMB 20,120,000. Relevant public notice was published on Securities Times and Hong Kong Wen Wei Po on Dec.28, 2007. 78,812 tradable shares of Merchants Bank Co. Ltd. (Short form of the stock: Merchants Bank, Stock code: 600036, hereinafter referred to as Merchants Bank)with restriction conditions held by the Company and is listed in Shanghai Stock Exchange, received qualification of coming into market on Feb.27, 2008. III. In the report period, the Company had no significant assets purchases, sales or reorganization. 36 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告摘要 IV. Significant related transaction 1. In the report period, the Company had no related transaction of purchase and sale of commodity and supply of labor and service with the related parties. 2. In the report period, the Company had no related transaction of transfer of assets and equity with the related parties. 3. In the report period, the Company had no related transactions invested by the related parties and the Company. 4. On credit and liability exchange and guarantee between the Company and the related parties, please refer to Note X of accounting statement for detail. 5. Other significant related transactions. In the report period, the Company signed Loan Agreement with SDG. SDG provided loan of RMB 5 million to the Company, with the loan term of two months. Relevant public notice was published on Securities Times and Hong Kong Wen Wei Po on Apr.7, 2007. In the report period, the Company signed Loan Agreement with SDG. SDG provided loan of RMB 5 million to the Company, with the loan term of two months. Relevant public notice was published on Securities Times and Hong Kong Wen Wei Po on Aug.29, 2007. In the report period, the Company signed Loan Agreement with SDG. SDG provided loan of RMB 9.5 million to the Company, with the loan term of one month. Relevant public notice was published on Securities Times and Hong Kong Wen Wei Po on Dec.5, 2007. V. Significant contracts and implementation (I) In the report period, the Company had no significant trusteeship and contract of other companies’ assets and vice visa; (II) Significant guarantee; 1. Significant guarantee Unit: RMB’0000 Particulars about the external guarantee of the Company (Barring the guarantee for the controlling subsidiaries) Name of the Date of happening Complete Amount of Guarantee Guarantee Guarantee for related Company (Date of signing Implement guarantee type term party (Yes or not) guaranteed agreement) ation or not Shenzhen Auto Industry Import August 13, 2007 2,000.00 Credit One year No Yes & Export Company Shenzhen Auto Industry Import Sep.18, 2007 1,461.00 Credit One year No Yes & Export Company Total amount of guarantee in the report 3,461.00 period Total balance of guarantee at the end of 3,461.00 the report period Guarantee of the Company for the controlling subsidiaries Total amount of guarantee for controlling subsidiaries during the 3,296.00 report period Total balance of guarantee for controlling subsidiaries at the end of 2,690.00 the report period Total amount of guarantee of the Company (including guarantee for controlling subsidiaries) Total amount of guarantees 6,151.00 Ratio of total guarantee to net assets of 39.46% 37 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告摘要 the Company Including: Amount of guarantee for shareholders, 0.00 actual controller and its related parties The debts guarantee amount provided for the guarantee of which the 3,461.00 assets-liability ratio exceeded 70% directly or indirectly Proportion of total amount of guarantee in net assets of the Company 0.00 exceeded 50% Total amount of the aforesaid three 3,461.00 guarantees Note: In the above sheet, Automobile Industry and Trade Company supplied guarantee totaling RMB 14,610,000 to Shenzhen Auto Industry Import & Export Company which was the guarantee supplied for the credit line no less than USD 2 million from the bank; and the aforesaid guarantee was examined and approved in 2007 1st Extraordinary Shareholders’ General Meeting held on August 10, 2007. 3. In the report period, the Company had not entrusted others with cash management or loans borrowing. 4. In the report period, the Company had no other significant contracts. VI. Commitments (I) SDG, the shareholder of non-circulating shares, made the following commitments during the work of Share Merger Reform of the Company: 1. Commitments on Lock-up period (1) In accordance with the Measures for the Administration of the Share Merger Reform of Listed Companies, SDG would abide by the various laws, regulations and rules, and perform its statutory commitment duty. (2) Apart from the above-mentioned statutory commitment, SDG also made the following special commitment: with 36 months since the day the reform plan starts to take effect, SDG would not list at Shenzhen Stock Exchange and sell the ST Tellus it held (except for the shares used to promote the administration level of ST Tellus). (3) The administration level would abide by the laws, regulations and rules, and perform its statutory commitment duty. (4) SDG made the commitment: “The Promiser hereby promises that, if the Promiser failed to fulfill its commitment or not fully fulfill its commitment, it would compensate other shareholders for their losses suffered thereafter”. (5) SDG declared: “The Promiser would dutifully fulfill its commitments and shoulder corresponding legal responsibilities. The Promiser would transfer the shares held by it only if the assignee agree and have the ability to shoulder the commitment responsibility.” 2. Special commitment concerning the incentive mechanism To effectively boost the core management level and business backbones for long, SDG would take out its shares, not exceeding 10% in total number after the Share Merger Reform, and apply them to the boost of the administration level. The shares would be sold to the Company’s administrative level over 3 years, with the selling price being the net asset value per share audited during the period nearest to the implementation. Before the implementation of the promoting plan by share selling each year, the administration level must prepay the Company a risk responsibility fund, i.e. 20% of the planned selling price; Should the work of the performance examination set by the Board failed to be finished, the paid risk responsibility fund would not be refunded and shall be owned by 38 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告摘要 the Company. Detailed rules concerning the limitations on the administration level, such as the subscription conditions and risk responsibility fund, and boost plans would be set by the Board and submitted to relevant departments for approval. The implementation of the shares for promoting would be conducted strictly according to relevant laws and regulations, and the circulation conditions of these shares would be in conformity with relevant regulations set by the Shenzhen Stock Exchange. 3. Relevant expenses of this Share Merger Reform of ST Tellus would be paid by SDG. (II). The aforesaid commitments is in process of implementation by SDG. The shares held by SDG are still in limited period. VII. Particulars about reception of investigation and interview In the report period, the Company followed the regulations of Guidance to Listed Company Fair Information Disclosure. The Company and relevant person in charge of information disclosure strictly obey the principle of fair information disclosure. Besides the aforesaid situation of reporting unopened information to controlling shareholders, there were no situations of distinctively treatment, selectively and privately disclosure, impartment or omission of unopened information to specific persons in advance. In report period, the Company had no situation of reception of investigation and interview. VIII. CPAs engaged In the report period, the Company continued to hire Shenzhen Nanfang Minhe Certified Public Accountants Ltd as the financial auditing agency for the year 2007. The amount of the auditing charges totaled RMB 0.55 million. Up to now, the CPAs have provided the Company with auditing services for 7 successive years. IX. In the report period, neither the Company, nor its Board or directors had been inspected by the CSRC, received any administrative punishments or circulating criticism from the CSRC, or publicly criticized by the Stock Exchange. CSRC Shenzhen Security Regulatory Office made field inspection of the Company from Jul.24, 2007 to Aug.10, 2007, and sent Notice Concerning Reform In limited Period of Shenzhen Tellus (Group) Co. Ltd. issued by SZJFZ[2007] No.36 (hereinafter referred to as Reform Notice) to the Company on Sep.27, 2007. After receiving Reform Notice, the Company reformed respectively in respect of independence, operation, information disclosure and financial accounting. Specific reform report was disclosed on Securities Times and Hong Kong Wen Wei Po on Nov.1, 2007. X. Other significant Events Significant events disclosed by the Company 1. Relevant public notice on 2006 annual performance pre-losses of the Company was respectively publicized on Security Times and Hong Kong Wen Wei Po on Jan.9, 2007; 2. Relevant public notice on performance pre-losses in the first quarter of 2007 of the Company was respectively published on Security Times and Hong Kong Wen Wei Po on Apr.10, 2007; 3. Relevant public notice on Lawsuit Progressss of the Case on Shenzhen Bank of China’s Complaint about the Overdue Loan of Shenzhen Petrochemical Industrial (Group) Co., Ltd. and the Company’s Guarantee for It was respectively published on Securities Times and Hong Kong Wen Wei Po on Apr.17, 2007; 4. Relevant public notice on Semi-annual pre-loss was respectively published on Securities Times and Hong Kong Wen Wei Po on Jul.10, 2007; 5. Relevant public notice on self-inspection report and reform plan of special activities of the Company administration was respectively published on Securities Times and Hong Kong Wen Wei Po on Sep.1, 2007; 39 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告摘要 6. Relevant public notice on performance pre-loss in the third quarter of 2007 was respectively published on Securities Times and Hong Kong Wen Wei Po on Oct.19, 2007; 7. Relevant public notice on reform report concerning strengthening special activities of the Company administration was respectively published on Securities Times and Hong Kong Wen Wei Po on Nov.1, 2007; 8. Relevant public notice on reform report of problems found by Shenzhen Security Regulatory Office tour inspection was respectively published on Securities Times and Hong Kong Wen Wei Po on Nov.1, 2007; 9. Relevant public notice on changing representative of stock affairs was respectively published on Securities Times and Hong Kong Wen Wei Po on Dec.14, 2007; 10. Relevant public notice on accounting estimation changes was respectively published on Securities Times and Hong Kong Wen Wei Po on Dec.28, 2007; 11. Relevant public notice on 2008 annual performance pre-gains was respectively published on Securities Times and Hong Kong Wen Wei Po on Dec.28, 2007; Section X. Financial Report AUDITORS’ REPORT 深南财审报(2008)CA296 号 AL L SHAREHOL DERS OF SHENZ HEN TEL L US HOL DING COM P ANY L IM ITED: (Incorporated in the People’s Republic of China with limited liability) We have audited the accompanying financial statements of Shenzhen Tellus Holding Company Limited (“the company”), which comprise the consolidated balance sheet as at 31 December 2007, and the consolidated income statement, the consolidated cash flow statement, the consolidated statement of changes in investors’ equity for the year then ended, and the notes to the financial statements. M anagem ent ’s Responsibilit y f or t he Financ ial St at em ent s The Company’s management is responsible for the preparation of these financial statements in accordance with the Accounting Standards for Business Enterprises. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accoungting estimates that are reasonable in the circumstances. Audit or’s Responsibilit y Our responsibility is to express an opinion on these financial statements based on our audit. We 40 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告摘要 conducted our audit in accordance with China’s Auditing Standards for the Certified Public Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the Group’s consolidated financial statements comply with the Accounting Standards for Business Enterprises and present fairly, in all material respects, the financial position of the Company as at 31 December 2007, and the consolidated results of operations and cash flows of the Company for the year then ended. Shenzhen Nanfang Minhe Accouting Firm Certified Public Accountants Registered in the People’s Republic of China Certified Public Accountants 41 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告摘要 Registered in the People’s Republic of China Shenzhen, China 15 April, 2008 Balance Sheet Prepared by ShenZhen Tellus Holding Co., Ltd. December 31, 2007 Unit: RMB Amount at period-end Amount at period-begin Items Merger Parent Company Merger Parent Company Current assets: Monetary funds 75,872,874.23 774,989.67 77,658,825.83 1,460,058.16 Settlement provisions Capital lent Transaction finance asset Notes receivable Accounts receivable 32,083,208.51 28,265,819.96 242,401.54 Accounts paid in 29,013,165.75 37,110,496.52 381,271.43 advance Insurance receivable Reinsurance receivables Contract reserve of reinsurance receivable Interest receivable Other receivables 75,599,502.62 27,202,666.46 53,714,852.49 30,570,654.37 Purchase restituted finance asset Inventories 71,001,329.38 93,430,348.73 Non-current asset due within one year Other current assets Total current assets 283,570,080.49 27,977,656.13 290,180,343.53 32,654,385.50 Non-current assets: Granted loans and advances Finance asset available 3,123,319.56 3,123,319.56 8,312,664.32 8,312,664.32 for sales Held-to-maturity 121,300.00 121,300.00 securities Long-term account receivable Long-term equity 177,712,541.66 340,808,578.14 145,581,807.43 306,895,273.16 investment Investment property 130,294,651.25 76,192,747.62 139,738,988.07 83,590,166.80 Fixed assets: 203,865,355.53 23,411,420.34 230,629,562.54 24,537,096.02 Construction in progress 96,294.37 Engineering material Disposal of fixed asset Consumable biological 42 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告摘要 asset Oil and gas asset Intangible assets 1,226,441.63 1,226,441.63 1,267,733.29 1,267,733.29 Expense on Research and Development Goodwill Long-term expenses to 10,928,423.69 32,920.96 5,523,964.90 62,706.04 be apportioned Deferred income tax 24,733,193.41 9,638,200.09 22,666,927.47 10,919,331.96 asset Other non-current asset Total non-current asset 552,005,226.73 454,433,628.34 553,939,242.39 435,584,971.59 Total assets 835,575,307.22 482,411,284.47 844,119,585.92 468,239,357.09 Current liabilities: Short-term loans 258,131,109.01 103,122,166.48 224,318,670.55 136,348,670.55 Loan from central bank Absorbing deposit and interbank deposit Capital borrowed Transaction financial liabilities Notes payable 90,000,000.00 Accounts payable 41,697,566.62 1,554.00 35,059,344.36 1,554.00 Accounts received in 24,574,657.41 14,662,029.70 advance Selling financial asset of repurchase Commission charge and commission payable Wage payable 14,016,085.82 3,454,267.72 12,718,234.18 1,481,989.24 Taxes payable 9,486,439.70 1,219,250.62 10,872,417.35 1,034,288.86 Interest payable Other accounts payable 165,447,450.02 182,265,702.31 156,640,708.27 164,646,897.28 Reinsurance payables Insurance contract reserve Security trading of agency Security sales of agency Long-term liabilities due within 1 year Other current liabilities 1,674,491.98 1,674,491.98 Total current liabilities 515,027,800.56 290,062,941.13 545,945,896.39 303,513,399.93 Non-current liabilities: Long-term loans 20,000,000.00 Bonds payable Long-term account 4,595,569.61 5,002,455.16 payable Special accounts payable Projected liabilities 87,568,728.57 87,568,728.57 87,568,728.57 87,568,728.57 Deferred income tax 3,267,374.30 459,410.78 4,069,652.67 823,599.05 liabilities Other non-current liabilities Total non-current liabilities 115,431,672.48 88,028,139.35 96,640,836.40 88,392,327.62 43 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告摘要 Total liabilities 630,459,473.04 378,091,080.48 642,586,732.79 391,905,727.55 Owner’s equity (or shareholders’ equity): Paid-in capital (or share 220,281,600.00 220,281,600.00 220,281,600.00 220,281,600.00 capital) Capital public reserve 5,439,871.88 7,082,509.96 7,503,605.45 9,146,243.53 Less: Inventory shares Surplus public reserve 2,952,586.32 2,952,586.32 2,952,586.32 2,952,586.32 Provision of general risk Retained profit -72,788,211.57 -125,996,492.29 -83,583,465.73 -156,046,800.31 Balance difference of foreign currency translation Total owner’s equity attributable to parent 155,885,846.63 104,320,203.99 147,154,326.04 76,333,629.54 company Minority interests 49,229,987.55 54,378,527.09 Total owner’s equity 205,115,834.18 104,320,203.99 201,532,853.13 76,333,629.54 Total liabilities and owner’s 835,575,307.22 482,411,284.47 844,119,585.92 468,239,357.09 equity Profit Statement Prepared by ShenZhen Tellus Holding Co., Ltd. January-December, 2007 Unit: RMB This period Same period of last year Items Merger Parent Company Merger Parent Company I. Total operating income 991,036,624.74 43,128,531.62 1,139,756,816.12 15,529,457.10 Including: Operating income 991,036,624.74 43,128,531.62 1,139,756,816.12 15,529,457.10 Interest income Insurance gained Commission charge and commission income II. Total operating cost 1,012,721,328.61 40,638,979.87 1,156,457,938.32 28,233,551.87 Including: Operating cost 881,291,102.25 9,301,674.05 1,039,337,889.24 4,162,834.75 Interest expense Commission charge and commission expense Cash surrender value Net amount of expense of compensation Net amount of withdrawal of insurance contract reserve Bonus expense of guarantee slip Reinsurance expense Operating tax and extras 4,213,130.44 768,354.66 4,069,821.82 807,531.75 Sales expenses 40,257,190.01 48,772,458.41 Administration 51,731,617.50 16,514,622.94 52,169,747.36 13,885,223.85 expenses Financial expenses 13,823,336.70 8,769,388.63 11,594,403.24 8,397,938.99 Losses of devaluation of 21,404,951.71 5,284,939.59 513,618.25 980,022.53 asset Add: Changing income of fair value(Loss is listed with “-”) 44 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告摘要 Investment income 33,163,334.11 30,262,943.03 16,434,065.98 9,244,358.63 (Loss is listed with “-”) Including: Investment income on affiliated company and joint venture Exchange income (Loss is listed with “-”) III. Operating profit (Loss 11,478,630.24 32,752,494.78 -267,046.22 -3,459,736.14 is listed with “-”) Add: Non-operating 5,231,312.03 422,387.96 14,054,617.39 9,844,751.75 income Less: Non-operating 9,976,349.04 1,343,442.85 97,975,831.14 95,079,481.68 expense Including: Disposal loss 8,496,950.66 876,792.48 of non-current asset IV. Total Profit (Loss is 6,733,593.23 31,831,439.89 -84,188,259.97 -88,694,466.07 listed with “-”) Less: Income tax 107,824.99 1,781,131.87 -279,876.39 -1,427,337.140 V. Net profit (Net loss is 6,625,768.24 30,050,308.02 -83,908,383.580 -87,267,128.930 listed with “-”) Net profit attributable to owner’s equity of parent 10,795,254.16 -87,991,436.550 company Minority shareholders’ -4,169,485.92 4,083,052.97 gains and losses VI. Earnings per share i. Basic earnings per share 0.05 -0.40 ii. Diluted earnings per share 0.05 -0.40 Cash Flow Statement Prepared by ShenZhen Tellus Holding Co., Ltd. January-December, 2007 Unit: RMB This period Same period of last year Items Merger Parent Company Merger Parent Company I. Cash flows arising from operating activities: Cash received from selling commodities and 1,203,616,967.95 8,219,406.13 1,276,491,172.69 10,525,182.20 providing labor services Net increase of customer deposit and interbank deposit Net increase of loan from central bank Net increase of capital borrowed from other financial institution Cash received from original insurance contract fee Net cash received from reinsurance business Insured savings and net increase of investment Net increase of disposal of transaction financial asset 45 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告摘要 Cash received from interest, commission charge and commission Net increase of capital borrowed Net increase of returned business capital Write-back of tax 164,839.99 403,739.81 received Other cash received concerning operating 11,019,447.20 41,413,029.02 26,745,232.59 52,886,159.78 activities Subtotal of cash inflow arising from operating 1,214,801,255.14 49,632,435.15 1,303,640,145.09 63,411,341.98 activities Cash paid for purchasing commodities and 1,131,789,611.54 1,146,286,296.71 receiving labor service Net increase of customer loans and advances Net increase of deposits in central bank and interbank Cash paid for original insurance contract compensation Cash paid for interest, commission charge and commission Cash paid for bonus of guarantee slip Cash paid to/for staff 53,533,393.79 4,847,255.67 57,612,968.26 5,037,893.42 and workers Taxes paid 21,728,078.09 2,784,916.49 29,175,919.93 6,272,114.68 Other cash paid concerning operating 69,744,446.13 28,995,434.42 65,013,948.86 27,679,072.39 activities Subtotal of cash outflow arising from operating 1,276,795,529.55 36,627,606.58 1,298,089,133.76 38,989,080.49 activities Net cash flows arising -61,994,274.41 13,004,828.57 5,551,011.33 24,422,261.49 from operating activities II. Cash flows arising from investing activities: Cash received from 25,887,466.28 22,879,666.28 141,000.00 141,000.00 recovering investment Cash received from 228,331.18 228,331.18 11,904,657.19 5,172,926.72 investment income Net cash received from disposal of fixed, intangible 5,143,379.36 27,344,381.00 10,390,181.00 and other long-term assets Net cash received from disposal of subsidiaries and other units Other cash received concerning investing 32,500,000.00 activities 46 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告摘要 Subtotal of cash inflow 63,759,176.82 23,107,997.46 39,390,038.19 15,704,107.72 from investing activities Cash paid for purchasing fixed, intangible 1,013,508.66 5,060.00 11,480,276.39 16,500.00 and other long-term assets Cash paid for 10,500,000.00 investment Net increase of mortgaged loans Net cash received from subsidiaries and other units Other cash paid concerning investing 13,942,730.91 activities Subtotal of cash outflow 1,013,508.66 5,060.00 35,923,007.30 16,500.00 from investing activities Net cash flows arising 62,745,668.16 23,102,937.46 3,467,030.89 15,687,607.72 from investing activities III. Cash flows arising from financing activities Cash received from 9,814,400.00 absorbing investment Including: Cash received from absorbing 9,814,400.00 minority shareholders’ investment by subsidiaries Cash received from 248,764,000.00 13,000,000.00 154,378,016.16 37,000,000.00 loans Cash received from issuing bonds Other cash received concerning financing activities Subtotal of cash inflow 258,578,400.00 13,000,000.00 154,378,016.16 37,000,000.00 from financing activities Cash paid for settling 218,714,000.00 46,250,000.00 153,550,519.46 45,264,519.46 debts Cash paid for dividend and profit distributing or 9,868,109.86 3,524,183.03 15,761,123.14 6,756,553.29 interest paying Including: Dividend and profit of minority 979,053.62 1,581,648.94 shareholder paid by subsidiaries Other cash paid concerning financing 24,452,100.00 24,452,100.00 activities Subtotal of cash outflow 228,582,109.86 49,774,183.03 193,763,742.60 76,473,172.75 from financing activities Net cash flows arising 29,996,290.14 -36,774,183.03 -39,385,726.44 -39,473,172.75 from financing activities IV. Influence on cash due to -33,635.49 -18,651.49 -12,875.59 -10,019.93 fluctuation in exchange rate V. Net increase of cash and 30,714,048.40 -685,068.49 -30,380,559.81 626,676.53 cash equivalents Add: Balance of cash 45,158,825.83 1,460,058.16 75,539,385.64 833,381.63 47 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告摘要 and cash equivalents at the period -begin VI. Balance of cash and cash 75,872,874.23 774,989.67 45,158,825.83 1,460,058.16 equivalents at the period -end 48 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告摘要 Statement on Changes of Owners' Equity Prepared by ShenZhen Tellus Holding Co., Ltd. December 31, 2007 Unit: RMB Amount in this report period Amount in last year Owners' equity belonged to the parent company Owners' equity belonged to the parent company Paid-up Minorit Total Paid-up General Minorit Total Items Less: General Less: capital Capital Surplus risk Retaine y owners capital Capital Surplus risk Retaine y owners’ Treasur Others Treasur Others (Share reserves reserves provisio d profit interest ’ equity (Share reserves reserves provisio d profit interest equity y Stock n y Stock capital) capital) n 220,28 -83,58 201,53 220,28 I. Balance at the end of the last 7,503,6 2,952,5 54,378, 5,780,6 3,218,3 -2,950, 51,344, 277,675,28 1,600.0 3,465.7 2,853.1 1,600.0 year 05.45 86.32 527.09 85.92 72.66 213.13 837.67 3.12 0 3 3 0 Add: Changes of accounting -4,479, -265,7 7,358,1 532,285 3,145,500. policy 182.23 86.34 83.95 .39 77 Error correction of the last period 220,28 -83,58 201,53 220,28 II. Balance at the beginning of 7,503,6 2,952,5 54,378, 1,301,5 2,952,5 4,407,9 51,877, 280,820,78 1,600.0 3,465.7 2,853.1 1,600.0 this year 05.45 86.32 527.09 03.69 86.32 70.82 123.06 3.89 0 3 3 0 III. Increase/ Decrease in -87,99 -2,063, 10,795, -5,148,5 3,582,9 6,202,1 2,501,4 -79,287,93 this year (Decrease is 1,436.5 733.57 254.16 39.54 81.05 01.76 04.03 0.76 listed with'"-") 5 -87,99 10,795, -4,169,4 6,625,7 4,083,0 -83,908,38 (I) Net profit 1,436.5 254.16 85.92 68.24 52.97 3.58 5 (II) Profits and losses 1,558,8 1,558,8 6,202,1 6,202,101. calculating into owners' equity 61.95 61.95 01.76 76 1. Net changing amount 1,558,8 1,558,8 4,667,0 4,667,061. 49 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告摘要 of fair value of financial 61.95 61.95 61.30 30 assets available for sale 2. Effect of changes of other owners' equity of invested units under equity method 3.Effect of income tax related to owners' equity 1,535,0 1,535,040. 4. Others 40.46 46 -87,99 1,558,8 10,795, -4,169,4 8,184,6 6,202,1 4,083,0 -77,706,28 Total of (I)and (II) 1,436.5 61.95 254.16 85.92 30.19 01.76 52.97 1.82 5 (III) Owners' devoted and decreased capital 1. Owners' devoted capital 2. Amount calculated into owners' equity paid in shares 3. Others -979,05 -979,0 -1,581,6 -1,581,648. (IV) Profit distribution 3.62 53.62 48.94 94 1. Withdrawal of surplus reserves 2. Withdrawal of general risk provisions 3.Distribution for owners -979,05 -979,0 -1,581,6 -1,581,648. (shareholders) 3.62 53.62 48.94 94 4.Others (V) Carrying forward internal -3,622, -3,622, 50 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告摘要 owners' equity 595.52 595.52 1.Capital reserves conversed to capital (share capital) 2. Surplus reserves conversed to capital (share capital) 3.Remedying loss with profit surplus -3,622, -3,622, 4.Others 595.52 595.52 220,28 -72,78 205,11 220,28 -83,58 IV. Balance at the end of 5,439,8 2,952,5 49,229, 7,503,6 2,952,5 54,378, 201,532,85 1,600.0 8,211.5 5,834.1 1,600.0 3,465.7 this report period 71.88 86.32 987.55 05.45 86.32 527.09 3.13 0 7 8 0 3 51 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan Not e 1. Com pany P rof ile 1 . C o m p an y S tatu s Shenzhen Tellus Machinery Co. Limited is a state-owned enterprise, established in Shenzhen in the People’s Republic of China (the PRC) On 11 December 1992, the Shenzhen Municipal People’s Government approved the reorganization of Shenzhen Tellus Machinery Co. Ltd. to become a public limited company. Shenzhen Tellus Machinery Co. Ltd. was renamed Shenzhen Tellus Holding Company Limited (hereinafter referred to as “the Company”) on 30 June 1994, with approval by the Shenzhen Administration for Industry and commerce. The company respectively obtained the approval certificates “Shen Zhen Ban Fu (1993) No. 34” and “Shen Zhen Shi Zi (1993) No. 22”from the Shenzhen Stock Management Office and Shenzhen Stock Exchange in June 1993. On 31 March 1997, with the approval of Shenzhen Municipal People’s Government “Shen Fu Han (1997) No.19” and China Security Regulatory Commission “Zhen Jian Han (1997) No.5”, Shenzhen Investment Administrative Company transferred its 159,588,000 shares to Shenzhen Te Fa (Group) Company Company Limited (hereinafter referred to as “the Te Fa Group”). The shares transferred represent 72.45% of the total issued shares of the Company. In order to circulate all the non-negotiable shares in the A share market, the Te Fa Group, as the one and only shareholder of non-negotiable shares in the Company, gave 13,717,440 shares to the holders of tradable shares of the company in the A share market(Per 10 tradable shares for 4 shares). The transferring was finished on 04 January 2006. After the split-share reform was completed, The Te Fa Group holds 66.22% of the shares capital of the Company. The Company holds the Business License(Shen Qi Fa Zi No. 01141). 2 . I n d u s tr y , B u s i n e s s S c o p e , m ai n p r o d u c ts o r s e r v i c e The company and its subsidiaries provided automobile overall services, including automobile retailing, inspection and maintenance, production of inspection equipment, property lease and property management service, etc. With the approval by Shenzhen Administration for Industry and Commerce, the Company’s business scope includes business, warehouse and transportation, mechanical accessory processing, mechanical equipment installation, mainland commerce, goods and materials business , (Government monopolistic goods and materials are not included.), import and export business of internal production materials and accessories. Import and export business complys with the approval certificate (Shen Mao Guan Zheng Zi 13 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan No.098). During the period reported, there was no change in the main operating business. 3 . Au th o r i ze d p e r s o n an d i s s u e d d ate o f th e f i n an c i al s tate m e n ts The financial statements of the Company are authorized to be issued to the public on 15 April 2008 by the Board of Directors. Not e 2. Basis P reparat ion of t he Financ ial St at em ent s The Company continues to operate as a going concern. These financial statements have been prepared on an accrual basis, according to the actual transations and events. The financial statements of the Company have been prepared in conformity with the requirements of the Accounting Standards for Business Enterprises issued by the Ministry of Finance of the PRC on 15 February 2006 and the Information Disclosure Standards for Listed Companies No.7—the Preparation & Disclosure of Comparative Financial Information in the Transition Period of New & Old Accounting Standards issued by the China Security Regulatory Commission on 15 February 2007. The financial statements of the Company have been prepared in accordance with the accounting policies and accounting estimates set out below. Not e 3. St at em ent of Com plianc e wit h t he Ac c o u n ti n g S tan d ar d s f o r B u s i n e s s E n te r p r i s e s The financial statements of the Company for the year ended 31 December 2007 are in conformity with the requirements of the Accounting Standard for Business Enterprises, and present fairly, in all material respects, the financial position, the results of operations, the cash flows and other relevant informations of the Company. Note 4. Accounting Policies, Accounting Estimates and Preparation Method of Consolidated Financ ial St at em ent s 1. F i s c al p e r i o d The accounting year of the company is from 1 January to 31 December of the Gregorian calendar year. 2. Currency used in book-keeping The Company’s reporting currency is the RMB Yuan. 3. B o o k - k e e p i n g b as i s an d m e as u r e m e n t attr i b u te s The accounting calculation is on an accrual basis. 14 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan The accounting elements are measured on the historic cost basis. In accordance with the requirements of the Accounting Standard for Business Enterprises, replacement cost, net realizable value, present value and fair value measurement will be adopted in order to make the value of accounting elements reliable. 4. C as h e q u i v al e n ts Cash equivalents represent short-term, highly liquid investments, which are readily convertible into known amounts of cash and are subject to an insignificant risk of change in value. 5. T r an s l ati o n o f f o r e i g n c u r r e n c y Foreign currency transactions during the accounting year are translated into RMB Yuan at the spot exchange rates quoted by the People’s Bank of China ruling at the transaction dates. 6. R e c o g n i ti o n an d m e as u r e m e n t o f th e F i n an c i al As s e ts an d F i n an c i al Li ab i l i ti e s 1) Financial Asset The initial Recognition of the Financila Assets are based on fair value and divided into the following four categories: trading financial assets; held-to-maturity investments; payments and accounts receivable; financial assets available for sale. Trading financial assets are measured at their fair values and whose variations are included into the current profit and loss. Financial assets available for sale are measured at their fair values and whose variations are included into the shareholders equity. Accounts receivial and held-to-maturity investments are measured at the amortized costs. Except for the financial asserts which are measured at their fair values and whose variations are included into the current profit and loss, the initial recognition should also include the transaction expenses related to the purchase of the financial assets. 2) Financial Liabilities Financial Liabilities are divided into the following two categories: trading financial liabilities and financial liabilities carried at amortized cost. 3) Fair values of financial assets and financial liabilities （ 1） The fair values of financial assets and financial liabilities in the principle market are measured by the offer of the principle market. （ 2） If there is no principle market for the financial instruments, the fair value is measured by valuation approach. 15 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan （ 3） The fair value of initial or originated financial assets and financial liabilities is measured on the basis of transaction prices. （ 4） The discount rate used to measure the fair values by the Discounted Future Cash Flow Method shall apply the rate of return of financial instruments in the market, which are the same in the contractual articles and characters. 4) Impairment of financial assets At the end of the accouting period, if there are approved evidences to clearly show the devaluation of financial assets (excluding the trading financial assets), Impairment losses are recognized at the balance of thecurrent value of future cash flow lower than the book value, and provisions for impairment of financial assets will be provided thereof. （ 1） Accounts receivable Allowance method is adopted in accounting of bad debt provision which may happen. At the end of fiscal year, impairment loss should be recognized if account receivable had devalued by approved evidence. Impairment losses are recognized at the balance of current value of future cash flow lower than the book value, and bad debt provisions will be provided thereof. At the end of fiscal year, impairment tests are performed separately on single account receivable which is with major amout or which is different from other account receivables by approved evidence. Impairment losses are recognized at the balance of current value of future cash flow lower than the book value, and bad debt provisions will be provided thereof. The individual account receivable with minor amount and those with major amount but suggested no impairment when separate impairment test was performed should be divided into several categories according to their risk characters. Impairment losses are recognized in proportion to their balances as at the date of balance sheet, and bad debt provisions will be drawn thereof. The propotion reflects the real impairment losses which my happen, namely the balance of the book value and the present value of future cash flow of each catergory. On the basis of previous actual loss ratio of the accounts receivable groups (namely aging-group) and the practical situations, the bad debt provisions will be drawn at the following schedule: Age Rate % 1 to 3 years (including 3 years) 3% Over 3 years 50% The Company does not draw bad debt provisions for current accounts between the parent 16 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan company and the consolidated subsidiaries. Bad debts are recognized when: (1) When the debtor is eliminated, bankrupted, or dead, and the account cannot be retrieved or significant short in cash flow after liquidation of the debtor’s assets or heritages. (2) The debtor hasn’t fulfilled its obligations to clear the overdue debt, and clear evidence suggesting that the account is impossible to be recovered. Bad debt loss is recognized when conclusive evidence suggests that the account is not receivable, and the bad debt provisions will be neutralized thereafter. If the conclusive evidence suggests that the account is not receivable, bad debts will be written off with the approval of board of directors. （ 2） Held-to-maturity investment The recognition and measurement of impairment losses of held-to-maturity investments is based on the impairment losses methods of accounts receivable. （ 3） Financial assets available for sale If the fair values of financial assets available for sale have decreased by a great amount, and the decrease is not temporary after considering all relevant factors, Impairment losses are recognized at the balance of current value of future cash flow lower than the book value, and bad debt provisions will be provided thereof. If the impairment losses of financial assets available for sale have actually incurred, the accumulating losses owing to the decrease of fair values in owner’s equity must be transferred. Impairment losses are recognized and bad debt provisions will be provided thereof. 7. I n v e n to r y Inventories are: stock, raw materials, product-in-process, finished goods, consumables and product-in-development, finished products and leased products under the real estate development project.etc. The inventories of non-real estate development enterprise should be initially measured in light of their cost. The cost of inventory consists of purchase costs, processing costs and other costs. Issuing inventories are measures by the weighted average method. Inventory accounting of real estate development enterprise inventory accounting includes: (1) The land for development: the expenditure of the Company to purchase land for development are initially measured as intangible assets and then amortized averagely at the remaining useful life years; transfer it to the product-in-developing recorded with net value after amortization 17 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan started from the finished date of real estate project. (2) Public facilities fee: completion of the actual construction costs included in the product development, if a number of real estate projects benefit from a public facility, it will be amortized at a proportion according to its sales area. Real estate projects are recorded into finished products at predicted costs when they are completed. (3) Public facilities specific fund: record it by 2% of the total investment (exclude the land value) and classify it to product-in-develping. (4) Quality guarantee deposit: record it into finished products cost based on the contract amount, meanwhile, records it into accounts payable, and pay it when guarantee expired. (5) Lease product: for the product being aimed to be sold but now leased temporarily, it is amortized at the book value and the expected average useful life. Inventory system: the Company applys perpetual inventory system. The measurement of net realizable value of the inventory: the net realizable value of finished products, goods, materials for sale and other goods directly for sale is measured by the estimated sale price deducting the estimated sale expense and relevant taxes. The net realizable value of material needed to be processed is measured by the estimated sale price of products deducting the estimated cost of completion, estimated sale expense and relevant taxes. The provisions of value decrease of inventories: on the balance sheet date, the provisions of value decrease of inventories are recognized when the net reliable values of inventories are lower than its book values, and are included in the current profits and losses. If the value of inventories is recovered in latter period, the amount of write-down should be resumed and be reversed from the provisions of value decrease of inventories that has been made. The reversed amount should be transferred to the current profits and losses. 8. Lo n g - te r m e q u i ty i n v e s tm e n ts 1) long-term equity investment category Long-term equity investments are: long-term equity investments on subsidiaries, long-term equity investments on joint enterprises, long-term equity investments on associated enterprises, long-term equity investments on enterprises with little control and influence,e which is not quoted in the principle market and whose fair value cannot be reliably measured (hereinafter referred to as "other long-term equity investments"). 2) Initial measurement of long-term equity investments 18 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan （ 1） The initial cost of a long-term equity investment formed in the merger of an enterprise. The initial cost of the long-term equity investment incurred in the merger of an enterprise should be ascertained in accordance with the following provisions: For the merger of enterprises under the same control, regard the share of the book value of the owner's equity of the merged enterprise as the initial cost of the long-term equity investment. The direct cost for the merger of the combining party should be recorded into the current profits and losses. For the merger under different control, the combination costs should be the fair values, on the acquisition date, of the assets paid, the liabilities incurred or assumed and the equity securities issued by the acquirer in exchange for the control on the acquiree. All relevant direct costs incurred to the acquirer for the merger should also be recorded into the initial cost of merger. （ 2） The initial cost of a long-term equity investment obtained by other means. The initial cost of a long-term equity investment obtained by making payment in cash shall be recognized at the purchase cost which is actually paid. The initial cost consists of the expenses directly relevant to the obtainment of the long-term equity investment, taxes and other necessary expenses. But the cash dividends in purchase payment, which is declared but not yet received, shall be included in a separate account receivable. The initial cost of a long-term equity investment obtained by issuing equity securities shall be recongnized at the fair valuse of the issued equity securities. The initial cost of a long-term equity investment of an investor shall be recognized at the contractual value, except the contractual value is unfair. If a long-term investment is obtained by the exchange of non-monetary assets, the transaction possesses commercial nature and the fair values of assets received or surrendered can be measured reliably, the initial cost of the long-term equity investment shall be recognized at the fair values of assets surrendered and the relevant expenses. The balance of fair values and the book values of assets received is included in the current profits and losses. If the a long-term equity investment is obtained by liabilities restructuring, the initial cost of the long-term equity investment shall be recognized by the fair values of equity. The balance of the initial cost of long-term equity investment and book value of claim is included in the current profits and losses. 3) Subsequent measurement of a long-term equity investment 19 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan For a long term equity investment on the subsidiaries, the Company shall be accounted by the cost method as prescribed by these Standards, and shall make an adjustment by the equity method when it works out consolidated financial statements. The following long-term equity investments of the joint venture and associated enterprises shall be measured by the equity method. On the date of balance sheet, if the long-term equity investments on the subsidiaries, the joint ventures and the associated ernterprises impair, the mpairment losses are recognized if the receivable values are lower than the book values. The impairment for long-term equity investment is drawn. If the other long-term equity investments impair, the mpairment losses are recognized at the balance of current value of future cash flow lower than the book value, and included in the current profits and losses. The impairment for long-term equity investment is drawn. The above-mentioned impairment for long-term equity investments can not be switched back in the future accounting periods. 4) Tthe recognizion of long-term equity investments The value of a long-term equity investment measured by the cost method shall be recognized at its initial investment cost. If there are additional investments or disinvestments, the cost of the long-term equity investment shall be adjusted. The dividends or profits declared to distribute by the investee shall be recognized as the current investment income. The current investment income recognized by the investee shall be limited to the allowed proportion of the accumulating net profits. The excess amount of the dividends or profits must be returned as cost of the initial investments. The long-term equity investment measured by the equity method shall recognize its investment profits and losses, and adjust the book value of long-term equity investments according to the attributable share of the net profits or losses of the investment. The investor shall, in the light of the profits or cash dividends declared to distribute by the investee, calculate the proportion it shall obtain, and shall reduce the book value of the long-term equity investment accordingly. For any variations of the owner's equity other than the changes of net profits and losses of the investee, the book value of the long-term equity investments shall be adjusted and be included in the owner's equity. When disposing a long-term equity investment, the difference between its book value and the actual purchase price shall be included in the current profits and losses. For the long-term equity investment measured by the equity method, any variations other than the changes of net profits and losses of the nvestee are included in the owner's equity. The amount of previous 20 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan long-term equity investment included in the owner's equity shall be transferred to the current profits and losses in a certain proportion. 9. I n v e s tm e n t r e al e s tate s 1) The classification of the investment real estates The investment real estates of the Company is the leased buildings. 2) Measurement of investment real estates The investment real estates shall be initially measured in light of their cost when getting it and make a follow-up measurement to the investment real estate through the cost pattern on the date of the balance sheet. The test method of depreciation or impairment of the buildings is the same as fixed assets’. 10. R e c o g n i ti o n , c l as s i f i c ati o n s an d d e p r e c i ati o n m e th o d s o f f i x e d as s e ts 1) Standard of fixed assets The Company’s fixed assets are: house & buildings, machines and equipments, transportation equipments, electronic devices and other devices. 2) Types of fixed assets Fixed assets of the company include: constructions like houses, machines, transport equipments, digital devices and other devices. 3) Measurement of fixed assets The initial measurement of a fixed asset shall be made at its cost. The cost of a purchased fixed asset consists of the purchase price, import duties, freights, insurance and other expenses that bring the fixed asset to the expected conditions for use and that may be relegated to the fixed asset. If the payment for a fixed asset is delayed beyond the normal credit conditions and it is of financing nature in effect, the cost of the fixed asset shall be ascertained based on the current value of the purchase price. The difference between the actual payment and the current value of the purchase price shall be included in the current profits and losses within the credit period, unless it shall be capitalized. 4) Depreciation methods The company adopted the straight-line method as the depreciation method, and decided the depreciation rate based on the carrying value of all types of fixed assets and their estimated useful life minusing the salvage value(which was 3%of the carrying value).Annual depreciation rates regarding to types were as follows: Category Useful life Annual depreciation rate% 21 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan Housing & building 35 years 2.77% machines 12 years 8.08% Transport equipment 7 years 13.86% Digital device 7 years 13.86% Other device 7 years 13.86% 5) Subsequent expenditures of fixed assets Subsequent expenditures of fixed assets shall not be capitalized unless they simultaneously meet the following requirements: (1) The relevant economic benefits may flow into the enterprise; and (2) The relevant costs to be incurred can be measured in a reliable way. If there was any replacement of the fixed assets, then the carrying value should be reduced.If the Subsequent expenditures of fixed assets could not comply with the above requirements, they should be credited to the current profits and losses. Improved expenditure of fixed assets acquired by operating lease should be capitalized as long-term prepaid expenses and amortizated in a reasonable period. 6) The impairment of fixed assets For fixed assets, at the balance sheet day, where any evidence shows that there is possible assets impairment, the recoverable amount of the assets shall be estimated. The recoverable amount shall be determined in light of the higher one of the net amount of the fair value of the assets minus the disposal expenses and the current value of the expected future cash flow of the assets.The estimation of recoverable amount should on the basis of individual asset. If it is difficult to estimate the recoverable amount, then it should be decided based on the asset group. Once any loss of asset impairment is recognized, it shall not be switched back in the future accounting periods. 11. C o n s tr u c ti o n i n p r o c e s s Construction in process includes the pre-construction preparations, the construction under the constructing process, installation, and technical transformation projects, overhaul works. The cost of construction in process shall be measured in the light of actual expenditure. Construction in process is transferred to fixed asset as soon as the asset reaches its useful status as expected. Since the date when the construction in process reaches its useful status as expected, it is transferred to fixed asset. 22 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan At the balance sheet date, as to construction in process which is long-term suspended and will not be re-started in three years, its loss accounted into Construction-in-progress impairment losses shall be calculated by the variance between the recoverable amount and the book value. Once any loss of asset impairment is recognized, it shall not be switched back in the future accounting periods. 12. Me as u r e m e n t an d am o r ti zati o n m e th o d o f i n tan g i b l e as s e ts Intangible assets include those with limited service life and those with uncertain service life. 1) Measurement of intangible assets The intangible assets shall be initially measured according to its actual cost. The cost of self-developed intangible assets shall include the total expenditures incurred during the period from the time when it meets the provisions of certain standards to the time when the expected purposes of use are realized. 2) Amortization of intangible assets (1) With regard to intangible assets with limited service life, its amortization amount shall be amortized within its service life systematically and reasonably. If it is unable to determine the expected realization pattern reliably, intangible assets shall be amortized by the straight-line method. (2) Intangible assets with uncertain service life may not be amortized. 3) The impairment of intangible assets Impairment tests should be conducted towards intangible assets with uncertain service life at the balance sheet day. For intangible assets with limited life, at the balance sheet day, where any evidence shows that there is possible assets impairment, the recoverable amount of the assets shall be estimated. If the recoverable amount is lower than its carrying value, the carrying value of the asset shall be recorded down to the recoverable amount, and the reduced amount shall be recognized as the losses of intangible asset impairment and be recorded as thecurrent profits and losses. Simultaneously, a provision for the asset impairment shall be made accordingly. Once any loss of asset impairment is recognized, it shall not be switched back in the future accounting periods. 13. Am o r ti zati o n p o l i c y o f l o n g - te r m p r e p ai d e x p e n s e s Determine a reasonable benefit period for Long-term prepaid expenses, and amortize it 23 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan according to its average benefit period. 14. B o r r o w i n g C o s ts The borrowing costs shall include interests on borrowings, amortization of discounts or premiums on borrowings, ancillary expenses, and exchange balance on foreign currency borrowings. Where the borrowing costs incurred to an enterprise can be directly attributable to the acquisition and construction or production of assets eligible for capitalization, it shall be capitalized and recorded into the costs of relevant assets. Other borrowing costs shall be recognized as expenses on the basis of the actual amount incurred, and shall be recorded into the current profits and losses. 1) Conditions of capitalization The borrowing costs shall not be capitalized unless they simultaneously meet the following requirements: (1) The asset disbursements have already incurred, which shall include the cash, transferred non-cash assets or interest bearing debts paid for the acquisition and construction or production activities for preparing assets eligible for capitalization; (2) The borrowing costs has already incurred; and (3) The acquisition and construction or production activities which are necessary to prepare the asset for its intended use or sale have already started. 2) Recognition of capitalized amounts 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 loan at the present period minus the income of interests earned on the unused borrowing loans as a deposit in the bank or as a temporary investment. Where a general borrowing is used for the acquisition and construction or production of assets eligible for capitalization, the enterprise shall 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. 3) Capitalize cost suspension 24 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan Where the acquisition and construction or production of a qualified fixed asset is interrupted abnormally and the interruption period lasts for more than 3 months, the capitalization of the borrowing costs shall be suspended. The borrowing costs incurred during such period shall be recognized as expenses, and shall be recorded into the current profits and losses, till the acquisition and construction or production of the asset restarts. If the interruption is a necessary step for making the qualified fixed asset under acquisition and construction or production to be ready for the intended use or sale, the capitalization of the borrowing costs shall continue. 4) Cease to capitalize cost When the qualified asset under acquisition and construction or production is ready for the intended use or sale, the capitalization of the borrowing costs shall be ceased. The borrowing costs incurred after the qualified asset under acquisition and construction or production is ready for the intended use or sale shall be recognized as expenses at the incurred amount when they are incurred, and shall be recorded into the current profits and losses. 15. E m p l o y e e r e m u n e r ati o n The term "employee remuneration" refers to all kinds of payments and other relevant expenditures given by enterprises in exchange of the services offered by the employees. The employee remuneration shall include: (1) Wages, bonuses, allowances and subsidies for the employees; (2) Welfare expenses for the employees; (3) Medical insurance, endowment insurance, unemployment insurance, work injury insurance, maternity insurance and other social insurances; (4) Housing accumulation fund; (5) Labor union expenditure and employee education expenses; (6) Non-monetary welfare; (7) Compensations for the cancellation of the labor relationship with the employees; and (8) Other relevant expenditures of services offered by the employees. During the accounting period of an employee' providing services to an enterprise, the enterprise shall recognize the remuneration payable as liabilities. Except for the remuneration for the cancellation of the labor relationship with the employee, the enterprise shall, in accordance with beneficiaries of the services offered by the employee, treat this liabilities as the product costs and service costs; construction costs of fixed asset; costs of intangible assets and the current 25 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan profits or losses. 16. R e c o g n i ti o n o f p r e d i c te d d e b ts The obligation pertinent to contingencies shall be recognized as anestimated debts when the following conditions are satisfied simultaneously: (1) That obligation is a current obligation of the enterprise; (2) It is likely to cause any economic benefit to flow out of the enterprise as a result of performance of the obligation; and (3) The amount of the obligation can be measured in a reliable way. Where an executory contract turns to be a loss contract, the obligation generated from the loss contract and restructuring obligations undertaken by an enterprise which meets the provisions above shall be recognized as an estimated debts. The estimated debts shall be initially measured in accordance with the best estimate of the necessary expenses for the performance of the current obligation. 17. R e c o g n i ti o n o f i n c o m e (1) No revenue from selling goods may be recognized unless the following conditions are met simultaneously: a. The significant risks and rewards of ownership of the goods have been transferred to the buyer by the enterprise; b. The enterprise retains neither continuous management right that usually keeps relation with the ownership nor effective control over the sold goods; c. The relevant amount of revenue can be measured in a reliable way; d. The relevant economic benefits may flow into the enterprise; and e. The relevant costs incurred or to be incurred can be measured in a reliable way. (2) If an enterprise can, on the date of the balance sheet, reliably estimate the outcome of a transaction concerning the labor services it provides, it shall recognize the revenue from providing services employing the percentageof-completion method. The company adopted the method which applied the proportion of the costs incurred against the estimated total costs to measure the work completed. If an enterprise can not, on the date of the balance sheet, measure the result of a transaction concerning the providing of labor services in a reliable way, it shall be conducted in accordance with the following circumstances, respectively: 26 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan a If the cost of labor services incurred is expected to be compensated, the revenue from the providing of labor services shall be recognized in accordance with the amount of the cost of labor services incurred, and the cost of labor services shall be carried forward at the same amount; or b If the cost of labor services incurred is not expected to compensate, the cost incurred should be included in the current profits and losses, and no revenue from the providing of labor services may be recognized. (3) No revenue from abalienating of right to use assets may be recognized unless the relevant economic benefits are likely to flow into the enterprise. The amount of interest revenue should be measured and confirmed in accordance with the length of time for which the enterprise's cash is used by others and the actual interest rate. The amount of royalty revenue should be measured and confirmed in accordance with the period and method of charging as stipulated in the relevant contract or agreement. 18. Government Subsidies A government subsidy means the monetary or non-monetary assets obtained free by an enterprise from the government, but excluding the capital invested by the government as the owner of the enterprise. Government subsidies consist of the government subsidies pertinent to assets and government subsidies pertinent to income. If a government subsidy is a monetary asset, it shall be measured in the light of the received or receivable amount. If a government subsidy is a non-monetary asset, it shall be measured at its fair value. If its fair value cannot be obtained in a reliable way, it shall be measured at its nominal amount. The government subsidies pertinent to assets shall be recognized as deferred income, equally distributed within the useful lives of the relevant assets, and included in the current profits and losses. But the government subsidies measured at their nominal amounts shall be directly included in the current profits and losses. The government subsidies pertinent to incomes, which are used for compensating the related future expenses or lossesof the enterprise shall be recognized as deferred income and shall included in the current profits and losses during the period when the relevant expenses are recognized while which are used for compensating the related expenses or losses incurred to the enterprise shall be directly included in the current profits and losses. 19. I n c o m e tax e s Where there is any difference between the carrying amount of an asset or liability and its tax base, it shall be recognized as a deferred income tax liability or deferred income tax asset according to 27 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan the present Standards.At the balance sheet date, the deferred income tax assets and deferred income tax liabilities shall be measured at the tax rate applicable to the period during which the assets are expected to be recovered or the liabilities are expected to be settled As for any deductible loss or tax deduction that can be carried forward to the next year, the corresponding deferred income tax assets shall be determined to the extent that the amount of future taxable income to be offset by the deductible loss or tax deduction to be likely obtained. The taxable temporary differences related to the investments of subsidiaries, associated enterprises and joint ventures shall recognize corresponding deferred income tax liabilities. However, those shall be excluded if the period of time of temporary differences are under control and they can not be switched back in the foreseeable future. 20. B u s i n e s s C o m b i n ati o n s The term "business combinations" refers to a transaction or event bringing together two or more separate enterprises into one reporting entity. Business combinations are classified into the business combinations under the same control and the business combinations not under the same control. 1) A business combination under the same control is a business combination in which all of the combining enterprises are ultimately controlled by the same party or the same parties both before and after the business combination and on which the control is not temporary. The assets and liabilities that the combining party obtains in a business combination shall be measured on the basis of their carrying amount in the combined party on the combining date. As for the balance between the carrying amount of the net assets obtained by the combining party and the carrying amount of the consideration paid by it (or the total par value of the shares issued),the additional paid-in capital shall be adjusted. If the additional paid-in capital is not sufficient to be offset, the retained earnings shall be adjusted. The direct cost for the business combination of the combining party shall, including the expenses for audit, assessment and legal services, be recorded into the profits and losses at the current period. The bonds issued for a business combination or the handling fees, commissions and other expenses for assuming other liabilities shall be recordedinto the amount of initial measurement of the bonds or other debts. The handling fees, commissions and other expenses for the issuance of equity securities for the business combination shall be credited against the surplus of equity securities; if the surplus is not sufficient, the retained earnings shall be offset. The "combining date" refers to the date on which the combining partyactually obtains control on the combined party. 2) A business combination not under the same control is a business combination in which the combining enterprises are not ultimately controlled by the same party or the same parties both before and after the business combination. The acquirer shall, on the acquisition date, measure 28 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan the assets given and liabilities incurred or assumed by an enterprise for a business combinationin light of their fair values. The acquirer shall recognize the positive balance between the combination costs and the fair value of the identifiable net assets it obtains from the acquiree as business reputation. It shall reexamine the measurement of the fair values of the identifiable assets, liabilities and contingent liabilities it obtains from the acquiree as well as the combination costs if the balance between the combination costs and the fair value of the identifiable net assets it obtains from the acquiree is negative. If, after the reexamination, the combination costs are still less than the fair value of the identifiable net assets it obtains from the acquiree, it shall record the balance into the profits and losses of the current period. The "acquisition date" refers to the date on which the acquirer actually obtains the control on the acquiree. 21. Pr e p ar ati o n m e th o d o f c o n s o l i d ate d f i n an c i al s tate m e n ts The combined financial statements include the Company and its subsidiaries. The Company stated the combination process right after acquiring the actual control right of the subsidiaries and stop it right after losing the actual control right of the subsidiaries. All the important balances between the Company and subsidiaries, transactions and unrealized profits within the Group were countered when preparing the combined financial statements. The investors’ equity of the subsidiary that is not attributable to the parent company will be listed separately in the minority interests in the consolidated finiancial statements. If the subsidiaries’ accouting policy and accouting period are different from the Company, the finiancial statements of the subsidiaries will be adjusted if needed, in accordance to the accouting policy and accounting period of the Company when preparing the consolidated financial statements. A subsidiary company getting from business combination not under the same control adjust the financial statements on the basis of the fair values of the identifiable net assets determined on the acquisition date when preparing consolidated financial statements.As to a subsidiary company getting from business combination under the same control, while preparing consolidated financial statements, it’s treated just like the business combination is happened from the earliest report term. The consolidated profit statement shall include the assets, liabilities, operating results and cash flow incurred from the earliest report term. The net profit of the combined party which has been realized prior to the combination is reflected through an item separately presented in the profit statement. Note 5. Explainations on important accounting policies, changes in accounting estimates and ac c ount ing errors 1. Changes in ac c ount ing polic ies According to Cai Kuai [2006] No.3 The Notification of Issuing and 38 Specified Criteria, released by the Ministry of Finance on Feb 15th, 2006, the Company adopted the new accounting standard for business enterprises from Jan 1st, 2007, and recognized Jan1st, 2007 as the adoption day. According to the requirements of Cai Kuai [2007] No.14 The Notification of Issuing by the Ministry of Finance, when preparing their fist annual reports, companies should review the book balance of assets and liabilities on the first adoption day, and disclose the adjusting process of shareholers’ equity at the beginning of the year and items that have been adjusted, the amount and their influeences. The company reviewed and amended the adjustment table of shareholders’ equity in accordance to the above-mentioned requirement. The amended differences of the adjustment table of shareholders’ equity on Nov 31st, 2006 are as follows: IM P ACT OF DIFFERENCES BETWEEN IFRS AND PRC ACCOUNTING STANDARDS ON FINANCIAL STATEM ENTS No. Items Figures in 2007 Figures in 2006 differences Reasonl Shareholders’ equity as at December 31, 2006(Based on 134,859,194.63 134,859,194.63 -- Existing Accounting Standards) 1 Differences of long-term equity investment -- -- -- Include：Differences in long-term equity investment caused by the merger of enterprises under the same (5,922,647.15) (8,852,218.84) 2,929,571.69 Note 1 control Other differences in credit of long-term equity -- -- -- investment measured on equity basis 2 Investment real estates measured on fair value basis -- -- -- 3 Prior year depreciation withdrawal due to dismantling cost -- -- -- Dismissal indemnity conformed to the acknowledgement of 4 (9,013,636.92) (9,013,636.92 ) -- estimated liabilities 5 Share-based payment -- -- -- Reconstructuring duties conformed to the 6 -- -- -- acknowledgement of estimated liabilities 7 Enterprises merger -- -- -- Include: Book value of enterprises consolidated good will -- -- -- under the same control Provision for impairment of goodwill withdrawn based on -- -- -- 30 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan New Acconting Standaards Financial asset booked as current losses and gains with fair 8 value measurement and changes, and financial assets 5,490,660.35 -- 5,490,660.35 Note 2 available for sale Financial liabilities booked as current losses and gains with 9 fair value measurement and changes, and disposable -- -- -- financial assets 10 Increased equity due to demerger of financial instrument -- -- -- 11 Derivative financial instruments -- -- -- 12 Income tax 21,740,755.13 20,473,848.98 1,266,906.15 Note 3 13 Minority interests 54,378,527.09 54,799,722.84 (421,195.75) Note 4 14 Others Shareholders’ equity as at December 31, 2006(Based on 201,532,853.13 192,266,910.69 9,265,942.44 New Accounting Standards) Note1: According to the requirements of the Accounting Standard for Business Enterprises No. 38——Fisr-time Adoption of Accounting Standard for Business Enterprises, balance arising from the long-term equity investments for the merger of enterprises under the same control should adjust the retained earnings.The difference between quotes of 2007 and that of 2006 lied in the recognition difference in scope of the subsidiairies from merger of enterprises under the same control. Note2: According to the requirements of the Accounting Standard for Business Enterprises No. 38——fisr time adoption of Accounting Standard for Business Enterprises, the company measured financial assets available for sale at fair values and retrospectively adjusted retained earinings. Note 3: According to requirtments of the Accounting Standard for Business Enterprises No. 38——fisr time adoption of Accounting Standard for Business Enterprises and Accounting Standard for Business Enterprises No.18——Income taxes, the Company recognized the temporary differences between the booking value of assets and liabilities on the first adoption day and their tax base, recogniaed deferred income tax assets and deferred income tax liabilities respectively, and increased shareholders’ equity by RMB Yuan 21,740,755.13. The difference between the quotes of 2007 and that of 2006 lied in the adjustment made towards the review of temporary differences. Note 4: The figure shows the influence of the adjustments on the minority interests, according to the above-mentioned requirements on the first adoption day. 2. Changes in ac c ount ing est im at es There were no important changes in accounting estimates of the Company in this reporting 31 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan period. 3. Correc t ion of ac c ount ing errors There were no important accounting errors of the Company in this reporting period. Not e 6. Tax at ions The t ypes of t ax applic able t o t he Com pany Their t ax rat es are as f ollows: Type Tax base Rate % Added value of sold goods 17% VAT Value of services 17% Operation tax Operation turnover 5% City maintaining & construction Taxalbe turnover 1% tax Corporation income tax Taxable income 15% 32 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan Not e 7.Ent erprise c onsolidat ion and c onsolidat ed f inanc ial st at em ent s 1 . C o n d i ti o n s o f s u b s i d i ar i e s i n c l u d e d i n th e c o n s o l i d ate d f i n i an c i al s tate m e n ts （ 1） Conditions of subsidiaries under the same control（ Expressed in 10,000 RMB Yuan） At the end of the year Actual net Registered Registered Business Real investment Holding Voting Name of subsidiary proportion% proportion% place capital scope investment balace in subsidiaries direct indirect direct indirect Shenzhen Automobile Automobile Industry and Trading and Company Shenzhen 5896 12625 12625 100 -- 100 -- accessories (The Automobile Industry selling and Trading） Automobile Shenzhen Tefa Huari maintenance Automobile EnterpriseCo. Shenzhen USD500 & production 1922 1922 60 -- 60 -- Limited and sales of (The Hua Ri ) accessories Shenzhen Zhongtianye Industry Co. Ltd Shenzhen 725 Leasing 1070 1070 100 -- 100 -- (The Zhongtian) Shenzhen Huari Toyota Automobile Automobile Co. Ltd Shenzhen 200 181 181 60 -- 60 -- selling (The Huari Toyota) （ 2） Conditions of subsidiaries consolidated by other means (Expressed in 10,000 RMB Yuan） 31 December 2007 Actual net Place of Actual Holding Voting Registere Business investment Name of subsidiary registratio investmen proportion% proportion% d capital scope balace in n t amount subsidiaries direct indirect direct indirec t Shenzhen Teli Xinyongtong Automobile Automobile Development Shenzhen 3290 inspection & 5767 5767 100 -- 100 -- Co. Ltd repair (The Xinyongtong) Shenzhen Tefa Teli Property Property Management Co. Ltd Shenzhen 705 502 502 100 -- 100 -- management (The Teli Property) Shenzhen Tefa Teli Real Real estate Estate Co. Ltd Shenzhen 3115 3115 3115 100 -- 100 -- development (The Real Estate) Shenzhen Teli Real Estate Real estate Exchange Co. Ltd Shenzhen 200 200 200 100 -- 100 -- agent (The Exchange) Shenzhen Xinyongtong Production of Automobile Inspection automobile Shenzhen 1000 100 100 10 90 10 90 Equipment Co. Ltd inspection (The Inspection) equipment Shenzhen Biaoyuan Automobile Automobile Co. Ltd Shenzhen 2188 552 552 25.23 -- 57.14 -- selling (The Biaoyuan Automobile) *According to the company chapter of Biaoyuan Automobile Co. Ltd, The Automobile Industry and Trading, who is a subsidiary of the Company, is the No. 1 shareholder of it. The 33 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan Automobile Industry and Trading has assigned four directors to its seven-member board of directors. Thus, it was included into the consolidated financial statement. 2 . C h an g e o f m e r g e r i n g s c o p e d u r i n g th e r e p o r ti n g p e r i o d There is on changes in mergering scope during the reporting period. 3 . Mi n o r i ty i n te r e s ts For the minority interests of the important subsidiaries of the company, amounts countered the profits and losses of minority interests and the balance of shareholders’ equity of parent company after deducting the net current losses of the minority interests of the subsidiaries, please see Note 8 minority interests and profits and losses. Not e 8.Not es t o m ain it em s of f inanc ial st at em ent s 1、 M onet ary f und 31 December 2007 31 December 2006 category Original Exchange Original Exchange currence currence currency rate currency rate Cash RMB 4,936,896.30 4,936,896.30 628,749.41 628,749.41 HKD 3,026.16 0.9364 2,833.70 10,756.33 1.0047 10,807.80 USD 1,433.00 7.3046 10,467.49 1,433.00 7.8087 11,190.29 Sub-total 4,950,197.49 650,747.50 Bank deposit RMB 70,473,720.60 70,473,720.60 72,932,234.33 72,932,234.33 HKD 165,608.13 0.9364 155,446.38 319,785.87 1.0047 321,338.26 USD 29,962.98 7.3046 218,867.59 32,842.23 7.8087 256,457.17 YEN -- -- 3,796.00 0.066 249.14 Sub-total 70,848,034.57 73,510,278.90 Other monetary 74,642.17 74,642.17 3,497,799.43 3,497,799.43 fund Total 75,872,874.23 77,658,825.83 Shenzhen Biaoyuan Automobile Co. Ltd, the subsidiary of the Company, issued acceptable draft based on its time deposits at back (which is listed in the other monetary fund) to settle the purchase payment. These deposits were not listed in cash and cash equivalents. The items listed in the cash and cash equivalents are as follows: 34 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan Amount Cash and Cash equivalents as at December 31, 2007 75,872,874.23 Monetary fund as at December 31, 2007 77,658,825.83 Less：pledged time deposit 32,500,000.00 Cash and Cash equivalents as at December 31, 2007 45,158,825.83 Net increase in cash and cash equivalents 30,714,048.40 2、 Ac c ount s rec eivable (1) Statement of accounts receivable balances at the end of year grouped according to their ages 31 December 2007 31 December 2006 Age Bad debt Bad debt Amount Ratio l% Amount Ratio l% provision provision Within 1 23,111,028.17 32.56 693,330.85 16,981,654.39 27.88 484,921.24 year Over 1 year but 3,992,740.36 5.62 119,482.21 1,785,060.16 2.93 53,552.19 within 2 years Over 2 years but 1,736,885.72 2.45 52,106.57 1,704,645.06 2.80 51,139.35 within 3 years Over 3 38,033,928.4 32,054,278.5 42,141,402.36 59.37 40,438,351.65 66.39 years 7 2 38,898,848.1 32,643,891.3 Total 70,982,056.61 100 0 60,909,711.26 100 0 (2) Statement of accounts receivable balances at the end of year grouped according to their risks 31 December 2007 31 December 2006 Categories Bad debt Bad debt Amount Ratio l% Amount Ratio l% provision provision I. Single item with major 27,215,984.34 38.34 15,379,873.06 19,400,408.39 31.85 13,225,405.28 amount II. Single item with 21,418,648.49 30.18 11,145,243.79 15,819,882.55 25.97 10,097,769.10 minor amount but 35 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan with greater risks when combined with other similar items III. Other 22,347,423.78 31.48 12,373,731.25 25,689,420.32 42.18 9,320,716.92 minor Total 70,982,056.61 100 38,898,848.10 60,909,711.26 100 32,643,891.30 According to the company’s own condition and industrial trait, each account receivable over one million yuan belongs to single item with major amount. (3) The top 5 accounts receivable as at December 31,2007 Proportion in Names Amount Age total% Zhanjiang Three Stars 4,060,329.44 5.72 Over 3 years （South Trading） Over 1 year but Wang Changlong 2,380,760.40 3.35 within 2 years Guangdong Property Group 1,862,000.00 2.62 Over 3 years （South Trading） Hong Kong He Fu Industry Over 1 year but 1,334,334.79 1.88 Co. Ltd within 2 years Hong Kong Jun Lang Co. Ltd 1,103,559.13 1.56 Within 1 year Total 10,740,983.76 15.13 （ 4） There is no balance of account receivable due from shareholders who is holding 5% or above voting shares at the end of the reporting period. （ 5） There was no amount of receivable due from related parties. 3、 P aym ent s in advanc e At the end of the year At the beginning of the year Age Propotrion in Proportion in Amount Amount total% total% Within 1 year 28,771,051.74 99.17 35,651,249.23 96.07 Over 1 year but within 2 92,275.02 0.31 1,181,424.00 3.18 years Over 2 years but within 3 135,282.40 0.47 122,827.99 0.33 years Over 3 years 14,556.59 0.05 154,995.30 0.42 Total 29,013,165.75 100 37,110,496.52 100 36 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan （ 1） There is no balance of accounts receivable due from shareholders holding 5% or above voting shares at the end of the reporting period. （ 2） There is no balance of accounts receivable due to associates. （ 3） Balance of accounts receivable over one year are due to invoice unavailable to settle the deals. （ 4） Details of the balances are as follows： Names Amount Age Reason Within 1 year 一汽丰田汽车销售有限公司 18,007,912.39 Automobile selling Within 1 year 丰田汽车（中国）投资有限公司 7,316,412.52 Automobile selling Within 1 year 广东联创奇 2,272,000.00 Automobile selling Within 1 year 上海通用别克部 869,224.85 Automobile selling Over 1 year but within 兴宁市糖酒设备厂 364,596.12 Goods selling 3 years 4、 Ot her rec eivables （ 1） Statement of other account receivable balances at the end of year grouped according to their ages: At the end of the year At the beginning of the year Age Proportion Bad debt Proportion Bad debt Amount Amount in total% provision in total% provision Within 1 54,874,345.69 44.00 1,669,624.37 38,445,379.67 40.59 1,153,361.39 year Over 1 year but 14,072,525.14 11.28 506,412.41 5,272,154.77 5.57 158,164.64 within 2 years Over 2 years but 5,197,550.40 4.17 155,926.51 3,404,887.94 3.60 102,146.64 within 3 years Over 3 50,569,572.29 40.55 46,782,527.61 47,587,542.48 50.24 39,581,439.70 years Total 124,713,993.52 100 49,114,490.90 94,709,964.86 100 40,995,112.37 37 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan （ 2） Statement of other accounts receivable balances at the end of year grouped according to their risks At the end of the year At the beginning of the year Categories Portion Bad debt Portion Bad debt Amount in total% provision Amount in total% provision I Single item with 37,390,333. 77,654,499.34 62.27 61,201,246.57 64.62 32,515,171.94 major amount 67 II. Single item with minor amount but 7,409,106.2 with greater risks 13,036,036.78 10.45 14,334,984.86 15.14 6,313,121.18 0 when combined with other similar items 4,315,051.0 III. Other minor 34,023,457.40 27.28 19,173,733.43 20.24 2,166,819.25 3 124,713,993. 49,114,490. 40,995,112.3 Total 100 94,709,964.86 100 52 90 7 A individual other receivable over 500,000 RMB Yuan was classified into single item with major amount category in accordance with the company’s own station and its industrial trait. （ 3） Top 5 other receivables as at Dec.31, 2007: Name Amount Proportion in total% Ages 中汽华南公司 9,832,956.37 7.88 Over 3 years Shenzhen Tellus Automobile Over 2 years Service Co.Ltd 6,625,538.10 5.31 but within 1 year 中浩公司 5,000,000.00 4.01 Over 3 years 凯丰 2 号楼 4,413,728.50 3.54 Over 3 years 金贝丽家电公司 2,706,983.51 2.17 Over 3 years Total 28,579,206.48 22.92 （ 4） There is no balance of other accounts receivable due from shareholders holding 5% or above voting shares at the end of year. （ 5） Up to 8.05% of the total other receivable are from associates. See Note 10. for details. 38 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan 5、 Invent ory and invent ory im pairm ent provision 31 December 2007 31 December 2006 Categories Provision for Net book Provision for Net book Amount Amount impairment value impairment value Raw materials 8,022,763.96 5,161,245.85 2,861,518.11 8,408,247.26 2,754,278.20 5,653,969.06 Consumables 219,084.90 -- 219,084.90 22,403.11 -- 22,403.11 Stock 77,037,245.30 13,185,484.01 63,851,761.2 92,438,709.72 12,593,097.7 79,845,611.99 products 9 3 Product in 6,606,901.25 4,031,262.45 2,575,638.80 6,057,132.51 -- 6,057,132.51 process Product in 1,493,326.28 -- 1,493,326.28 1,851,232.06 -- 1,851,232.06 developing Total 93,379,321.6 22,377,992.3 71,001,329.3 108,777,724.6 15,347,375.9 93,430,348.73 9 1 8 6 3 Basis of recognizing the cashable net value of above inventories is: individual recognition. Namely on the average unit price of the product in recent months, minus direct expenses and taxes may occurred upon cashing. * Details of products in developing are as follows： 31 December 31 December Provision for Items Timing Increase Decrease 2006 2007 impairment 玮鹏花园 4 号楼住 -- 2002.6.21 357,905.78 -- 357,905.78 -- 宅 玮鹏花园 4 号办公 -- 2002.6.21 470,212.59 -- -- 470,212.59 楼 玮鹏花园 5-7 商场 2002.6.21 1,023,113.69 -- -- 1,023,113.69 -- Total 1,851,232.06 -- 357,905.78 1,493,326.28 -- 6、 Financ ial asset s available f or sale 31 December 31 December Items 2007 2006 Transactional equity 3,123,319.56 8,312,664.32 instrument investment include： 3,123,319.56 1,289,364.32 Shares of China Merchants Bank Shares of 原水股份 -- 7,023,300.00 Total 3,123,319.56 8,312,664.32 39 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan 7、 Held-t o-m at urit y invest m ent s 31 December 31 December Item 2007 2006 Bond 121,300.00 121,300.00 Total 121,300.00 121,300.00 8、 L ong-t erm invest m ent on st oc k s 31 December 31 December 2007 2006 Items Impairment Impairment Book balance Net book value Book balance Net book value provision provision Investment on joint -- -- -- -- -- -- venture Investment on 139,287,118.12 -- 139,287,118.12 107,156,383.89 -- 107,156,383.89 associates Other equity 72,138,564.19 33,713,140.65 38,425,423.54 72,138,564.19 33,713,140.65 38,425,423.54 investment Total 211,425,682.31 33,713,140.65 177,712,541.66 179,294,948.08 33,713,140.65 145,581,807.43 （ 1） Affiliates companies on equity basis Proportion Name of the Registere Proportion Net asset at the Principal activities of shares Total Income Net profit Companies d place of votes end of term held Shenzhen Tellus Investment, leasing of Jimen Investment Shenzhen property, 50% 50% 56,704,960.00 -- -- Co. administration Shenzhen Hua Tong Automobile repairs Automobile Shenzhen 30% 30% 47,283,601.71 27,559,976.43 (4,778,841.26) and sales Company Ltd. Shenzhen Xing Long Manufacture and sell Mechanical Models Shenzhen steel moulds for 50% 50% 17,855,005.02 -- 151,886.55 Co. plastic product Shenzhen Te Li Provide automobile Automobile Services (1,963,727.55 Shenzhen repairs and inspection 40% 40% (5,936,180.68) 3,278,785.55 Development ) services Co.Ltd. Shenzhen Zung Fu Benz Automobile Te LiAutomobiles Shenzhen 35% 35% 67,800,893.601,187,556,223.76 35,175,009.99 repairs and sales Services Co.Ltd Shenzhen Automobile Industry Automobile import and Shenzhen 31.60% 31.60% 24,943,185.86 130,245,834.07 (94,901.98) Import and Export export Co. Shenzhen Dongfeng Shenzhen Automobile selling 25% 25% 76,658,455.52 238,914,743.80 4,415,870.49 Automobile Co. 深 圳市 标 远 车 会有 Automobile adornment Shenzhen 25.23% 25.23% 9,620,117.91 7,125,554.66 3,143,487.93 限公司 selling 40 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan Shenzhen Biao Yuan Automobile repairs Automobile Shenzhen 25.23% 25.23% 16,208,236.98 36,333,269.91 2,144,229.40 and inspection Maitenance Co.Ltd. Shenzhen Biao Yuan Shenzhen Driver training 12.62% 12.62% 8,622,710.89 7,757,911.25 4,351,683.51 Driver Training Co. Shenzhen BiaoYuan Roewe Lu Hua Automobile Shenzhen 25.23% 25.23% 9,410,867.67 69,703,971.37 (588,798.75) Automobile Selling Sales and Service Co. Shenzhen Biaoyuan Chevrolet Shenzhen 22.71% 22.71% 10,060,268.21 109,145,228.92 (1,311,373.40) Investment Co. Automobile selling 41 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan （ 2） Investment in affiliate companies on equity basis Original Beginning of the Additional Cash dividend Decrease in Accumulated Impairment Names of the companies Equity adjusted 2007-12-31 investment year Investment obtained investment change provision Shenzhen Jimen Investment Co. 28,352,480.0 28,352,480.00 -- -- -- -- -- 28,352,480.00 -- Ltd. 0 Shenzhen Hua Tong Automobile (3,431,725.76 19,076,879.43 17,340,899.00 -- (1,695,745.33) -- -- 15,645,153.67 -- Co. ) 深圳兴龙机械模具公司 2,554,392.64 9,313,001.03 -- (1,378,442.64) -- -- 5,380,165.75 7,934,558.39 -- Shenzhen Tellus Automobile 800,000.00 -- -- -- -- -- (800,000.00) -- -- Service Developing Co.Ltd. 深圳市仁孚特力汽车服务 10,500,000.00 15,097,950.00 -- 12,311,250.00 3,676,237.05 -- 13,232,962.95 23,732,962.95 -- 有限公司 Shenzhen Automobile Industrial 4,934,460.20 8,737,434.29 -- (76,900.59) -- -- 3,726,073.50 8,660,533.70 -- Import and Export Co. 深圳东风汽车有限公司 14,527,044.85 14,527,044.85 -- 1,102,500.00 -- -- 1,102,500.00 15,629,544.85 -- 深圳市标远通用汽车公司 6,500,000.00 6,284,968.52 -- -- -- 6,284,968.52 -- -- -- 深圳市标远车会有限公司 454,000.00 647,663.00 -- 298,880.93 -- -- 492,543.93 946,543.93 -- 深圳市标远汽车维修有限公司 6,620,415.00 13,837,432.06 -- 1,915,167.40 -- -- 9,132,184.46 15,752,599.46 -- Shenzhen BiaoYuan Driver Training 2,500,000.00 2,135,513.69 -- 2,151,076.54 -- -- 1,786,590.23 4,286,590.23 -- Co. 深圳市标远路华汽车销售 9,000,000.00 9,000,000.00 -- (588,798.75) -- -- (588,798.75) 8,411,201.25 -- 服务公司 Shenzhen BiaoYuan Investment Co. 9,000,000.00 10,234,477.45 -- (299,527.76) -- -- 934,949.69 9,934,949.69 -- 42 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan Original Beginning of the Additional Cash dividend Decrease in Accumulated Impairment Names of the companies Equity adjusted 2007-12-31 investment year Investment obtained investment change provision 114,819,672.1 28,352,480.0 30,967,446.0 139,287,118.1 Sub-total 107,156,383.89 13,739,459.80 3,676,237.05 6,284,968.52 -- 2 0 0 2 43 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan （ 3） Other equity investment on cost basis Proportion Beginning of At the end of Impairment Name of the companies of the Initiate costs Increase Decrease the year the year provision investment 中国浦发机械工业总公司 5.30% 10,176,617.20 10,176,617.20 -- -- 10,176,617.20 -- 湖南昌阳实业股份有限公司*1 36.55% 6,900,000.00 1,810,540.70 -- -- 1,810,540.70 1,800,000.00 深圳汉力高技术陶瓷有限公司*1 80% 3,466,000.00 1,956,000.00 -- -- 1,956,000.00 1,956,000.00 深圳捷成电子有限公司*1 45% 3,150,000.00 3,225,000.00 -- -- 3,225,000.00 3,225,000.00 深圳经纬实业股份有限公司 12.50% 4,000,000.00 4,000,000.00 -- -- 4,000,000.00 4,000,000.00 深圳（莫斯科）股份有限公司 7.00% 825,000.00 825,000.00 -- -- 825,000.00 825,000.00 武汉威特酒店 640,000.00 640,000.00 -- -- 640,000.00 640,000.00 深圳先导化工新材料有限公司*1 40% 7,256,401.38 4,751,621.62 -- -- 4,751,621.62 4,648,000.00 上海市原水股份有限公司 123万股 2,761,422.92 2,761,422.92 -- 2,761,422.92 -- -- 深圳石油化工（集团）股份有限公司 10万股 700,000.00 700,000.00 -- -- 700,000.00 686,900.00 南方汽车维修中心*1 100% 6,700,000.00 6,700,000.00 -- -- 6,700,000.00 6,700,000.00 中国汽车工业深圳贸易公司*2 40% 400,000.00 400,000.00 -- -- 400,000.00 295,056.53 凯丰特种汽车有限公司*1 30% 3,359,743.02 3,359,743.02 -- -- 3,359,743.02 3,359,743.02 深圳通用标准件有限公司*1 25% 500,000.00 500,000.00 -- -- 500,000.00 500,000.00 深圳火炬火花塞工业公司*2 49% 17,849.20 17,849.20 -- -- 17,849.20 -- 中汽华南汽车销售公司*1 49% 2,250,000.00 2,250,000.00 -- -- 2,250,000.00 2,250,000.00 深圳鹏驰汽车公司*2 32.94% 9,898,382.78 9,898,382.78 -- -- 9,898,382.78 -- 44 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan （ 3） Other equity investment on cost basis(continued) At the At the end of Impairment Name of the companies Proportion Initiate costs beginning of Increased decreased the year provision the year 电动车项目 11.10% 600,000.00 600,000.00 -- -- 600,000.00 92,000.00 深圳市南方汽贸投资有限公司 14.73% 11,710,000.00 11,710,000.00 -- -- 11,710,000.00 -- 深圳金鹤标准件模具有限公司 15.00% 453,440.00 453,440.00 -- -- 453,440.00 453,440.00 中汽培训中心 6.25% 600,000.00 600,000.00 -- -- 600,000.00 600,000.00 深圳百力源电源有限公司*1 25.00% 1,320,000.00 1,320,000.00 -- -- 1,320,000.00 1,320,000.00 迷你龙（曾文刚） 6.25% 162,000.00 162,000.00 -- -- 162,000.00 162,000.00 深圳市益民汽车贸易公司 200,001.10 200,001.10 -- -- 200,001.10 200,001.10 深圳市比斯克机械交通有限公司 15.00% 302,368.57 302,368.57 -- -- 302,368.57 -- 深圳市驰赫汽车有限公司 10.09% 4,000,000.00 4,000,000.00 -- -- 4,000,000.00 -- 深圳市车商服务有限公司 10.00% 80,000.00 80,000.00 -- -- 80,000.00 -- 深圳市车商投资有限公司 10.00% 1,500,000.00 1,500,000.00 -- -- 1,500,000.00 -- Sub-total 81,167,803.25 72,138,564.19 -- -- 72,138,564.19 33,713,140.65 *1 These companies have stopping business for years, and the Company does not have material influence on them. *2 The Company does not have material influence on these companies. 45 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan （ 4） Long-term equity investment impairment provisions are as follows: At the At the end of Name of the companies beginning of Increased Decreased Reasons the year the year 深圳先导化工新材料有限公司 4,648,000.00 -- -- 4,648,000.00 *1 湖南昌阳实业股份有限公司 1,800,000.00 -- -- 1,800,000.00 *1 深圳汉力高技术陶瓷有限公司 1,956,000.00 -- -- 1,956,000.00 *1 深圳捷成电子有限公司 3,225,000.00 -- -- 3,225,000.00 *1 南方汽车维修中心 6,700,000.00 -- -- 6,700,000.00 *1 中国汽车工业深圳贸易公司 295,056.53 -- -- 295,056.53 *3 凯丰特种汽车有限公司 3,359,743.02 -- -- 3,359,743.02 *1 深圳通用标准件有限公司 500,000.00 -- -- 500,000.00 *2 中汽华南汽车销售公司 2,250,000.00 -- -- 2,250,000.00 *1 深圳经纬实业股份有限公司 4,000,000.00 -- -- 4,000,000.00 *1 深圳（莫斯科）股份有限公司 825,000.00 -- -- 825,000.00 *1 武汉威特酒店 640,000.00 -- -- 640,000.00 *1 深圳石油化工（集团）股份 686,900.00 -- -- 686,900.00 *3 有限公司 电动车项目 92,000.00 -- -- 92,000.00 *3 深圳金鹤标准件模具有限公司 453,440.00 -- -- 453,440.00 *3 中汽培训中心 600,000.00 -- -- 600,000.00 *2 深圳百力源电源有限公司 1,320,000.00 -- -- 1,320,000.00 *2 迷你龙（曾文刚） 162,000.00 -- -- 162,000.00 *2 深圳市益民汽车贸易公司 200,001.10 -- -- 200,001.10 *3 Total 33,713,140.65 -- -- 33,713,140.65 *1 These companies have stopping business for years，and the investment on them is not expected to recover. *2 These companies have withdrawn or have been cancelled the business licenses， and the investment on them is not expected to recover. *3 These companies are seriously insolvent due to poor management，and the investment on them is not expected to recover. 46 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan 9、 Invest m ent real est at es 31 December 31 December Items Increase Decrease 2006 2007 Original value Buildings 195,650,730.42 -- 10,788,451.08 184,862,279.34 Sub-total 195,650,730.42 -- 10,788,451.08 184,862,279.34 depreciation Buildings 55,911,742.35 5,342,690.76 6,686,805.02 54,567,628.09 Sub-total 55,911,742.35 5,342,690.76 6,686,805.02 54,567,628.09 Book valud Buildings 139,738,988.07 130,294,651.25 Total 139,738,988.07 130,294,651.25 10、 Fixed assets and accumulative depreciation 31 December 31 December Items Increase Decrease 2006 2007 Original value Houses & buildings 305,789,151.71 984,511.82 31,499,340.90 275,274,322.63 Machinery & 22,874,399.41 346,583.00 2,941,257.48 20,279,724.93 equipment Transportation 13,523,823.78 2,503,365.33 2,350,256.84 13,676,932.27 Tools Electric Equipment 9,982,768.36 1,362,344.00 478,967.46 10,866,144.90 Other equipment 11,056,884.09 296,658.00 2,177,497.93 9,176,044.16 Building fitting fee 4,272,878.23 406,732.68 1,729,335.61 2,950,275.30 Total 367,499,905.58 5,900,194.83 41,176,656.22 332,223,444.19 depreciation Houses & buildings 90,348,813.46 9,133,062.30 14,913,952.64 84,567,923.12 Machinery & 16,720,602.57 954,565.71 2,148,215.25 15,526,953.03 equipment Transportation 9,604,045.15 1,082,251.90 1,874,588.88 8,811,708.17 Tools Electric Equipment 6,930,556.29 798,821.98 432,573.49 7,296,804.78 Other equipment 8,270,633.62 705,285.92 2,012,096.26 6,963,823.28 Building fitting fee 764,390.63 538,316.78 343,132.45 959,574.96 Total 132,639,041.72 13,212,304.59 21,724,558.97 124,126,787.34 Less: impairment provisions Houses & buildings 3,555,385.70 -- -- 3,555,385.70 Machinery & 650,147.31 -- -- 650,147.31 equipment Other equipment 25,768.31 -- -- 25,768.31 47 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan Total 4,231,301.32 -- -- 4,231,301.32 10、 Fixed assets and accumulative depreciation(continued) 31 December 31 December Items Increase Decrease 2006 2007 Book value Houses & buildings 211,884,952.55 187,151,013.81 Machinery & 5,503,649.53 4,102,624.59 equipment Transportation 3,919,778.63 4,865,224.10 Tools Electric Equipment 3,052,212.07 3,569,340.12 Other equipment 2,760,482.16 2,186,452.57 Building fitting fee 3,508,487.60 1,990,700.34 Total 230,629,562.54 203,865,355.53 （ 4） For restricted property right of fix assets, please see Note 12. （5）Ended at Dec.31, 2007, the Company had not applied or obtained the Property Certificates of the buildings with book values of RMB Yuan 162,140,000 and net values of RMB Yuan 115,130,000. 11、 Const ruc t ion in progress Amount Other 31 31 transferred decrease Fund Name of project Budget December Increase December into in recourse 2006 2007 fixed asset this term Sales department 96,294.37 240,438.53 336,732.90 -- -- reconstructure Independent The first exhibition hall -- 240,073.14 240,073.14 -- -- fitment Sales department -- 81,000.00 81,000.00 -- -- ari-condition fee Total 96,294.37 561,511.67 657,806.04 -- -- 12、 Int angible asset s Balance at Balance at Retained Original the Accumulated Item obtain Increase Transferred Amortize the end amortizing value beginning of amortizing of term period the year Patent Buying 24,000.00 23,200.00 -- -- 2,400.00 3,200.00 20,800.00 8 years technologies Land using Buying 1,699,998.80 1,244,533.29 -- -- 38,891.66 494,357.17 1,205,641.63 32 years right Total 1,723,998.80 1,267,733.29 -- -- 41,291.66 497,557.17 1,226,441.63 48 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan Less：Total of accumulative amount of intangible -- -- asset impairment provisions Total of intangible 1,267,733.29 1,226,441.63 asset book value 13、 L ong-t erm def erred ex penses Balance at Retained Original the Accumulated Balance at the Items Increase Amortize amortizing Amount beginning of amortizing end of term period the year Fitment 246,955.91 20,944.52 109,279.80 30,885.26 147,616.85 99,339.06 1年 Biaoyuan Automobile store 10,501,154.86 3,287,505.10 6,653,649.76 464,000.00 1,024,000.00 9,477,154.86 4年 4S Repairing fee 374,873.46 87,361.49 -- 79,543.69 367,055.66 7,817.80 1年 Web net 116,412.00 62,706.04 -- 29,785.08 83,491.04 32,920.96 1-2 年 constructure fee Hotel equipment 2,461,596.59 1,702,987.77 -- 721,054.32 1,479,663.14 981,933.45 2年 Subsequent 735,641.15 217,191.24 199,955.00 172,208.17 487,414.36 244,938.07 1-4 年 restructure fee Other 558,866.36 145,268.74 29,800.00 90,749.25 474,546.87 84,319.49 1-4 年 Total 14,995,500.33 5,523,964.90 6,992,684.56 1,588,225.77 4,063,787.92 10,928,423.69 14、 Def f ered inc om e t ax asset s 31 December 31 December Items 2007 2006 Items with assets book value lower 24,293,026.09 18,943,874.15 than tax base Items with liabilities book value higher 440,167.32 -- than tax base Future recoverable accumulative -- 3,723,053.32 losses Total 24,733,193.41 22,666,927.47 15、 Asset Im pairm ent P rovision Items 31 December Increase Decrease 31 December 49 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan 2006 Written 2007 Transferred back Bad debt provision 73,639,003.67 14,374,335.33 -- -- 88,013,339.00 Inventory 15,347,375.93 7,030,616.38 -- -- 22,377,992.31 impairment provision Long-term equity investment impairment 33,713,140.65 -- -- -- 33,713,140.65 provision Fixed assets and 4,231,301.32 -- -- -- 4,231,301.32 impairment provision Total 126,930,821.57 21,404,951.71 -- -- 148,335,773.28 16、 Short -t erm loans 31 December 31 December Type of loan 2007 2006 Credit loan 136,313,102.53 55,274,160.00 Pledged loan 109,698,006.48 155,312,140.55 Guarantee loan 12,120,000.00 13,732,370.00 Total 258,131,109.01 224,318,670.55 The overdued short-term loans are as follows: Name of the company Balance at the Type of the Time end of the year loan Shui Bei Branch * Industrial and Commercial 34,500,000.00 Pledge 2004.7.30-2005.2.28 Bank of China Ren Min Qiao Branch * 25,000,000.00 Pledge 2006.5.8-2007.3.8 Shenzhen Development Bank Off-shore Department 2,598,006.48 Pledge 2001.6.28-2001.12.28 China Merchants Bank Luo Hu Branch Industrial and Commercial 3,600,000.00 Gurantee 2005.2.28-2005.11.27 Bank of China Luo Hu Branch Industrial and Commercial 640,000.00 Gurantee 2004.7.21-2005.4.20 Bank of China Shenzhen Investment 1,200,000.00 Credit 1992.10-1994.10 Management Co. Ltd Shenzhen Investment 500,000.00 Credit 1992.11-1994.11 Management Co. Ltd Total 68,038,006.48 * Theseshort-term loans has signed the installation contracts with the banks. 50 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan 17、 Bills payable Mode of the note 2007-12-31 2006-12-31 Bank acceptance -- 90,000,000.00 Total -- 90,000,000.00 18、 Ac c ount s payable （ 1） No accounts payable to shareholders with 5% or above voting shares of the C ompany. （ 2） Balance of accounts payable from associate are shown in Note 10. 19、 Rec eipt s in advanc e 31 December 2007 31 December 2006 Age Amount Proportion% Amount Proportion% Within 1 22,124,924.97 90.03 13,485,420.53 91.98 year Over 1 year but within 2 1,457,373.17 5.93 44,608.50 0.30 years Over 2 years but within 3 10,220.60 0.04 4,390.20 0.03 years Over 3 years 982,138.67 4.00 1,127,610.47 7.69 Total 24,574,657.41 100 14,662,029.70 100 （ 1） No account collected in advance from shareholders with 5% or above voting shares of the Company. No account collected in advance from the associates. （ 2） The balances of account collected advance aging over one year are unsettled payment. （ 3）67.61% of increase at the end of this year, compared to the end of last year, is mainly due to the increase of receipts in advance in automobile selling. 20、 Ac c rued payroll 31 Increase Decrease 31 December Items December 2007 2006 Wage, bonus, allowance and 8,161,316.92 49,227,454.87 46,244,314.56 11,144,457.23 subsidy Employees’ welfare 4,003,489.91 1,017,525.82 4,105,756.58 915,259.15 Social security 52,864.37 7,289,162.71 6,815,317.78 526,709.30 51 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan Housing fund -- 216,644.69 216,644.69 -- Trade union fee and education 500,562.98 1,139,193.85 662,306.37 977,450.46 fee No-monetary welfare -- -- -- -- Compensation for releasing of -- 1,087,810.40 668,450.72 419,359.68 labor service contract Others -- 48,870.00 16,020.00 32,850.00 Including：shares paid in cash -- -- -- -- Total 12,718,234.18 60,026,662.34 58,728,810.70 14,016,085.82 21、 Tax payable 31 December 31 December Taxation 2007 2006 VAT (2,943,302.28) (1,728,641.17) Business tax 1,251,022.63 1,147,868.51 City (31,612.29) (24,780.76) construction tax Enterprise 3,494,792.41 3,172,505.78 income tax Property tax 1,018,750.28 1,487,578.11 Land VAT 6,495,729.09 6,578,729.09 Personal income 14,932.66 55,352.75 tax Education surtax 154,467.22 152,385.65 Other 31,659.98 31,419.39 Total 9,486,439.70 10,872,417.35 22、 Ot her payables （ 1）Other account payable to shareholders with 5% or above voting shares of the Company are shown in Note 10. （ 2） Balance of the other account payable from associates are shown in Note 10. 23、 Ot her c urrent liabilit ies 31 December 31 December Name of the investor Cause of debt 2007 2006 Minor shareholders of Shenzhen Biaoyuan Not paid 1,674,491.98 1,674,491.98 Automobile Co. 52 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan Total 1,674,491.98 1,674,491.98 24、 L on-t erm L oans 31 December 31 December Mode of the loan 2007 2006 pledge 20,000,000.00 -- Total 20,000,000.00 -- Balances are as follows: Balance at the end Mode of the Name of the company Mature date of the year loan Constucture Bank of China, 20,000,000.00 pledged 2010-9-27 Shenzhen Branch 25、 L ong-t erm P ayables 31 December 31 December Iterm 2007 2006 Technical innovation 686,721.21 1,093,606.76 loan Employee housing 2,588,848.40 2,588,848.40 deposit Other loan 1,320,000.00 1,320,000.00 Total 4,595,569.61 5,002,455.16 26、 Ac c rued liabilit ies 31 December Increase Decrease 31 December Categories 2006 2007 External -- -- 87,568,728.57 87,568,728.57 guarantee Total 87,568,728.57 -- -- 87,568,728.57 As stated in Note 11and 12, the Company signed a “Guarantee Contract for a limited loan” with Shenzhen Petroleum & Chemical Limited Company ( “Petroleum & Chemical Limited”) and China Agricultural Bank Shenzhen Shangbu Subbranch on 14 December 1995. Our company guaranteed Petroleum & Chemical Limited to borrow a loan of RMB Yuan 57,600,000 from China Agricultural Bank Shenzhen Shangbu Subbranch, which would expire on 14 December 2000. On 9 May 2006, the Company received the civil judgment of (2004) Shen Zhong Fa Min No. 437 from the Shenzhen Intermediate People’s Court. In its judgment of first instance, the 53 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan Shenzhen Intermediate People’s Court ordained that the Company should assume the joint liability of satisfaction for the loan of Petroleum & Chemical Limited. The Company shall repay the loan principal of RMB Yuan 57,600,000 and interests to the China Agricultural Bank Shenzhen Shangbu Subbranch, within 10 days upon effectiveness of this judgment. (The interests should be calculated in accordance with the overdue interest rate for the loan of the corresponding period issued by the People’s Bank of China from 30 December 2000 to the date of liquidation.) As Petroleum & Chemical Limited was delisted and its assets were seized by the creditors, the Company made provision of RMB Yuan 87,568,728.57for the relevant losses (Principal and interests are included. The interests have been caculated to December 31, 2006), in accordance with the Accounting Regulations for Business Enterprises. 27、 Def f ered inc om e t ax liabilit y 31 December 31 December Items 2007 2006 Book value of assets 3,267,374.30 4,069,652.67 higher than tax base Total 3,267,374.30 4,069,652.67 28、 P aid_in Capit al 31 December Increas Decreas 31 December Items 2006 e e 2007 I.Negotiable shares with selling restriction condition 1、State-owned shares -- -- -- -- 2、State-owned legal person shares 145,870,560.00 -- -- 145,870,560.00 3、Domestic legal person shares -- -- -- -- 4、Overseas legal person shares -- -- -- -- 5、Domestic nature person shares 13,300.00 -- -- 13,300.00 6、others -- -- -- -- 145,883,860.0 Sub-total 145,883,860.00 -- -- 0 II.Unconditional negotiable shares 1 、 RMB common shares placed in the country 47,997,740.00 -- -- 47,997,740 2、Foreign shares placed in the country 26,400,000.00 -- -- 26,400,000.00 3、Foreign shares placed abroad -- -- -- -- 4、Others -- -- -- -- Sub-total 74,397,740.00 -- -- 74,397,740.00 III.Total 220,281,600.00 -- -- 220,281,600.0 54 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan 0 29、 Capit al reserve 31 31 December Items December Increase Decrease 2007 2006 Share capital premium -- -- -- -- Other capital reserves 7,503,605.45 1,558,861.95 3,622,595.52 5,439,871.88 include ： variations of fair values of 4,667,061.30 1,558,861.95 3,622,595.52 2,603,327.73 financial assets available for sale Capital reserve transferred under the -- -- -- -- Existing Standards Total 7,503,605.45 1,558,861.95 3,622,595.52 5,439,871.88 The increase of balance is due to the variations of fair values of the financial assets available for sale. 30、 Surplus reserve 31 December Increase Decrease 31 December Items 2006 2007 Statutory surplus 2,952,586.32 -- -- 2,952,586.32 reserves Arbitrary surplus -- -- -- -- reserves Total 2,952,586.32 -- -- 2,952,586.32 31、 Ret ained earnings 31 December 31 December Items 2007 2006 Net profit belongs to owner of 10,795,254.16 (87,991,436.55) parent company Add：Undistributed profit at (83,583,465.73) 4,407,970.82 beginning of the year Less：profit distributed -- -- Including ： distilled statutory -- -- surplus reserves Undistributed profit at (72,788,211.57) (83,583,465.73) end of year 55 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan 32、 Equit y, prof it and loss of t he m inor shareholder Excess losses Proportion of the Borne by the Name of the company Equity Profit and loss share held% parent company Shenzhen Hua Ri 40% 17,356,174.48 699,550.17 -- Automobile Co. 华日丰田 40% 2,731,090.18 1,633,525.69 -- Shenzhen Biaoyuan (6,578,419.67 74.77% 29,012,983.41 -- Automobile Co. ) 深 圳 市 新 永 通 东晓 5% -- (53,881.59) -- 汽车检测有限公司 深 圳 市 宝 安 石 泉实 5% 129,739.48 129,739.48 -- 业有限公司 Total 49,229,987.55 (4,169,485.92) -- 33、 Inc om es and c ost s: Incomes Costs Gross profit Items Figures in Figures in 2007 Figures in 2006 Figures in 2007 Figures in 2006 Figures in 2007 2006 Major 958,004,501.9 1,133,692,161.0 business 874,273,069.61 1,036,486,678.15 83,731,432.32 97,205,482.92 3 7 income Other business 33,032,122.81 6,064,665.05 7,018,032.64 2,851,211.09 26,014,090.17 3,213,453.96 income Total 991,036,624.7 1,139,756,826.1 881,291,102.25 1,039,337,889.24 109,745,522.49 100,418,936.88 4 2 （ 1） Main business income are classified according to the industrial trait: Main business incomes Main business costs Gross profit Items Figures in Figures in 2007 Figures in 2006 Figures in 2007 Figures in 2006 Figures in 2007 2006 Automobile 806,834,650.3 780,396,983.5 986,857,463.26 950,000,564.34 26,437,666.74 36,856,898.92 selling 0 6 Automobile imspection, 69,025,439.62 71,127,511.01 56,581,706.75 52,031,481.59 12,443,732.87 19,096,029.42 repairing and parts selling Leasing and 82,144,412.01 75,707,186.80 37,294,379.30 34,454,632.22 44,850,032.71 41,252,554.58 56 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan service 958,004,501.9 874,273,069.6 Total 1,133,692,161.07 1,036,486,678.15 83,731,432.32 97,205,482.92 3 1 （ 2） Proportion of sales income from top five clients: Figures in 2007 Figures in 2006 Items Proportion of the Proportion of the Turnover Turnover total amount% total amount% Amount 89,072,990.04 9.30% 34,010,764.83 3% （ 3） Other business items: Other business income Other business cost Other business profit Item Figures in Figures in Figures in Figures in Figures in Figures in 2007 2006 2007 2006 2007 2006 Disposal of iinvestment 28,352,480.00 -- 5,030,928.49 -- 23,321,551.51 -- real estate Agent 2,110,481.24 76,149.76 2,034,331.48 1,879,573.2 2,343,766.56 464,193.28 service 8 Leasing 1,116,335.0 2,569,161.57 3,494,666.96 1,910,954.39 2,378,331.88 658,207.18 service 8 Water and -- 130,717.03 -- 2,342.65 -- 128,374.38 electricity Others -- 95,514.50 -- 6,343.28 -- 89,171.22 Total 33,032,122.81 6,064,665.05 7,018,032.64 2,851,211.09 26,014,090.17 3,213,453.96 34、 Operational tax and surcharges Items Figures in 2007 Figures in 2006 Business tax 3,684,147.95 3,614,685.25 City maintenance and 160,432.47 150,624.72 construction tax Education surtax 368,550.02 304,511.85 Total 4,213,130.44 4,069,821.82 35、 Financial expenses categories Figures in 2007 Figures in 2006 Interest expense 14,130,655.77 12,955,746.69 Less: interests income 855,400.80 2,032,123.39 Exchange loss 225,746.30 185,427.57 Less: Exchange gain 455,806.47 261,848.72 Others 778,141.90 747,201.09 57 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan Total 13,823,336.70 11,594,403.24 36、 Asset impairment losses categories Figures in 2007 Figures in 2006 Bad debt losses 14,374,335.33 513,618.25 Inventory impairment 7,030,616.38 -- losses Total 21,404,951.71 513,618.25 37、 Investment income Categories Figures in 2007 Figures in 2006 Gains from selling the trading financial assets -- -- Gains from selling the financial assets available for 20,120,452.32 -- sale Gains from long-term equity investment 13,042,881.79 16,434,065.98 include：dividends from investees 228,331.18 7,284,971.55 Gains from disposal of investments (148,909.19) 1,671,820.87 Increase or decrease of net profits from * 12,963,459.80 7,477,273.56 investee by equity method Total 33,163,334.11 16,434,065.98 The above investmeng gains exclude the gains from projects with severe restrictions. The 102% of increase in this period is mainly due to the increase of gains from disposal of investments. 38、 Non-business income categories Figures in 2007 Figures in 2006 Net gain from disposal of 3,562,677.90 12,254,241.73 non-current assets Including：Net gain from disposal 3,562,677.90 12,254,241.73 of fixed assets Net gain from disposal of -- -- intangible asset Net gain from debt reformation 1,268,742.95 1,484,198.82 Penalty 282,702.29 95,773.50 Compensation for housing -- 100,230.77 reform Others 117,188.88 120,172.57 Total 5,231,312.02 14,054,617.39 The 63% of decrease in this period is mainly due to the decrease of gains from disposal of fixed 58 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan assets. 39、 Non-business expenditures Categories Figures in 2007 Figures in 2006 Net loss from disposal of 8,496,950.66 876,792.48 non-current assets Including：Net loss from disposal 8,496,950.66 876,792.48 of fixed assets Net loss from disposal of -- -- intangible asset Penalty 31,506.26 210,982.05 Commonweal donation -- 93,569.52 Conpensation expenses 163,617.58 -- Extraordinary loss 1,179,800.00 163,636.43 Guarantee loss -- 87,568,728.57 Net loss from debt reformation -- 6,272,814.34 Employee Compensatory -- 2,789,307.75 Other 104,474.54 -- Total 9,976,349.04 97,975,831.14 The 90% decrease in this reporting period is mainly due to the predicted guarantee losses of last term. 40、 Income tax Figures in Figures in Items 2007 2006 Income tax expenditure of 5,795,183.70 1,060,469.54 current term Defered income tax expenditure (5,687,358.71) (1,340,345.93) Total 107,824.99 (279,876.39) The 40% decrease in this reporting period is mainly due to the combined influence of increase of income tax (owing to the increase of profits) and the increase of deferred income tax (owing to the provisions of impairment for investment). 41、 Earnings per share The calculation of earnings per share are as follows： 59 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan Item Figures in 2007 Figures in 2006 Net attributable to owner of the 10,795,254.16 (87,991,436.55) Company Weighted average of issued common 220,281,600.00 220,281,600.00 shares Basic earnings per share 0.05 (0.40) (RMB Yuan Per share) Deluted earnings per share 0.05 (0.40) (RMB Yuan Per share) 42、 Cash flow Statement （ 1） Cash received relating to operatin activities Figures in Items Figures in 2006 2007 Current accounts with associates 9,764,155.23 23,347,372.03 Amount pledged and guaranteed -- 1,194,055.14 Interest income 855,400.80 1,981,281.75 Penalty received 399,891.17 222,523.67 Total 11,019,447.20 26,745,232.59 （ 2） Cash paid relating to operating activities. Items Figures in 2007 Figures in 2006 Current accounts with associates 19,063,957.97 16,156,659.72 Internal short-term borrowings and -- 2,688,768.28 deposits Operating and administrating 45,863,969.29 49,201,089.78 expense Penalty and donation 1,479,398.38 304,551.57 Total 69,744,446.13 65,013,948.86 60 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan （ 3） Cash received from investment activities Item Figures in 2007 Figures in 2006 Recover of the pledged time 32,500,000.00 -- deposits Total 32,500,000.00 -- （ 4） Cash paid relating to other investing activities item Figures in 2007 Figures in 2006 Cash from disposal of subsidiaries at -- 11,707,425.72 at the transferred date Additional pledged time deposits -- 2,235,305.19 Total -- 13,942,730.91 （ 5） Cash received from other financing activities Item Figures in 2007 Figures in 2006 Repayment of predicted liability -- 24,452,100.00 Total -- 24,452,100.00 （ 6） Cash and cash equivalents Items Figures in Figures in 2006 2007 一、Cash 75,872,874.23 45,158,825.83 Including：Cash in stock 4,950,197.49 650,747.50 Bank deposit on demand 70,922,676.74 44,508,078.33 二、Cash equivalents -- -- 三、Balance of cash and cash equivalents 75,872,874.23 45,158,825.83 （ 7） Supplementary information of the Cash Flow Statement Supplementary Information Figures in 2007 Figures in 2006 1、Net profit adjusted to cash flow of operation: Net profit 6,625,768.24 (83,908,383.58) Plus: Asset impairment reserves 21,404,951.71 1,308,579.93 Fixed asset, productive materials, investment 18,554,995.35 19,421,605.33 property depreciation Amortizing of intangible assets 41,291.66 39,691.66 61 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan Supplementary Information Figures in 2007 Figures in 2006 Amortizing of long-term expenses 1,588,225.77 5,084,231.88 Loss from disposal of fixed assets, intangible assets (18,387,278.75) (11,377,449.25) and other long-term asset Loss of disposing fixed assets -- -- Loss from change of fair value -- -- Financial expenses 14,908,797.67 13,626,526.63 Investment loss (33,163,334.11) (16,434,065.98) Decrease of differed income tax asset (2,066,265.94) (1,370,319.20) Increase of differed income tax liability (802,278.37) -- Decrease of inventory 15,398,402.97 (6,131,504.37) Decrease of operating receivable accounts (31,979,043.24) (29,220,154.07) Increase of operating payable accounts (54,118,507.37) 114,512,252.35 Net value (61,994,274.41) 5,551,011.33 2、Material investment and financing not involved in cash -- -- flow 3、Net change of cash and cash equivalents Balance of cash at period end 75,872,874.23 45,158,825.83 Less: Initial balance of cash 45,158,825.83 75,539,385.64 Plus: Balance of cash equivalents at the period end -- -- Less: Initial balance of cash equivalents -- -- Net increase of cash and cash equivalents 30,714,048.40 (30,380,559.81) Not e 9.Not es t o f inanc ial st at em ent s of parent c om pany 1、 Ac c ount s rec eivable (1) Statement of accounts receivable balances at the end of year grouped according to their ages 31 December 2007 31 December 2006 Age Bad debt Bad debt Amount proportion% Amount proportion% provision provision Over 3 484,803.08 100 484,803.08 484,803.08 100 242,401.54 years Total 484,803.08 100 484,803.08 484,803.08 100 242,401.54 （ 2） Statement of accounts receivable balances at the end of year grouped according to their risks 31 December 2007 31 December 2006 Categories Proport Bad debt Proport Bad debt Balance Balance ion % provision ion % provision Single item with major -- -- -- -- -- -- 62 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan amount Single item with minor amount but with greater 484,803.08 100 484,803.08 484,803.08 100 242,401.54 risks when combined with other similar items Other minor -- -- -- -- -- -- Total 484,803.08 100 484,803.08 484,803.08 100 242,401.54 2、 Ot her ac c ount s rec eivable ( 1 )Statement of other accounts receivable balances at the end of year grouped according to their ages: 31 December 2007 31 December 2006 Age Proportion Bad debt Proportion Bad debt Amount Amount % provision % provision 1within 1 50.25 20,214,171.28 52.08 222,679.62 20,344,319.59 176,586.70 year Over 1 year but within 2 3,065,029.43 7.57 176,187.54 4,508,318.16 11.62 135,249.54 years Over 2 years but 3,059,156.28 7.56 108,828.35 3,535,233.72 9.10 70,327.01 within 3 years Over 3 34.62 10,553,834.76 27.20 7,812,647.38 14,017,602.76 12,821,839.01 years Total 40,486,108.06 100 13,283,441.60 38,811,557.92 100 8,240,903.55 ( 2 )Statement of accounts receivable balances at the end of year grouped according to their risks 31 December 2007 31 December 2006 Categories Proporti Bad debt Proporti Bad debt Balance Balance on % provision on % provision Single item with major 7,181,572.2 35,696,746.81 88.17 11,230,333.20 30,468,266.79 78.50 amount 5 Single item with minor amount but with greater 1,044,437.93 2.58 1,327,709.19 1,790,690.26 4.61 895,345.13 risks when combined with other similar items Other minor 3,744,923.32 9.25 725,399.21 6,552,600.87 16.89 163,986.17 8,240,903.5 Total 40,486,108.06 100 13,283,441.60 38,811,557.92 100 5 （ 3） Top 5 of other account receivable at the end of the year: 63 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan Name Amount Proportion % Age Over 1 year but 深圳市特力汽车服务发展有限公司 6,625,538.10 16.36 within 3 years 中浩公司 5,000,000.00 12.35 Over 3 years 金贝丽家电有限责任公司 2,706,983.51 6.69 Over 3 years Over 2 years but 深圳市石油化工（集团）股份有限公司 1,932,038.91 4.77 within 3 years Over 1 year but 深圳市兴龙模具有限公司 1,501,586.51 3.71 within 3 years Total 17,766,147.03 43.88 3、 L ong-t erm invest m ent on st oc k s 31 December 2007 31 December 2006 Items Impairment Impairment Amount provision Net value Amount provision Net value Investment in 254,839,543.6 254,839,543.6 254,839,543.6 254,839,543.6 -- -- subsidiaries 1 1 1 1 Investment in -- -- -- -- -- -- joint businesses Investment in cooperation 75,665,155.01 -- 75,665,155.01 41,751,850.03 -- 41,751,850.03 businesses Other equity 28,084,779.52 17,780,900.00 10,303,879.52 28,084,779.52 17,780,900.00 10,303,879.52 investment Total 358,589,478.1 17,780,900.00 340,808,578.1 324,676,173.1 17,780,900.00 306,895,273.1 4 4 6 6 64 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan （ 1） Investment on equity basis Share Equity Cash Initial investment 31 December Decreas Accumulated 31 December Impairment Name of the company proport Increase changed this dividend cost 2006 e change 2007 provision -ion % term obtained 50% 28,352,480.0 深圳特力吉盟投资有限公司 28,352,480.00 -- -- -- -- -- 28,352,480.00 -- 0 30% (1,695,745.33 深圳市华通汽车公司 19,076,879.43 17,340,899.00 -- -- -- (3,431,725.76) 15,645,153.67 -- ) 50% (1,378,442.64 深圳兴龙机械模具公司 2,554,392.64 9,313,001.03 -- -- -- 5,380,165.75 7,934,558.39 -- ) 深圳市特力汽车服务发展 40% 800,000.00 -- -- -- -- -- (800,000.00) -- -- 有限公司 深圳市仁孚特力汽车服务 12,311,250.0 3,676,237.0 35% 10,500,000.00 15,097,950.00 -- -- 13,232,962.95 23,732,962.95 -- 有限公司 0 5 Sub-total 61,283,752.07 41,751,850.03 28,352,480.00 9,237,062.03 3,676,237.05 -- 14,381,402.94 75,665,155.01 -- 65 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan （ 2） Investment on cost basis Share propor Initial investment 31 December 31 December Impairment Name of the company Increase Decrease -tion% cost 2006 2007 provision Investment in subsidiaries 深圳特力特发房地产公司 100 31,152,888.87 31,152,888.87 -- -- 31,152,888.87 -- 深圳市特发特力物业 100 5,021,970.88 5,021,970.88 -- -- 5,021,970.88 -- 管理公司 深圳市特发新永通实业 100 57,672,885.22 57,672,885.22 -- -- 57,672,885.22 -- 有限公司 深圳市中天实业有限公司 100 10,708,622.90 10,708,622.90 -- -- 10,708,622.90 -- 深圳市汽车工业贸易总公司 100 126,251,071.57 126,251,071.57 -- -- 126,251,071.57 -- 深圳特发华日汽车企业 60 19,224,692.65 19,224,692.65 -- -- 19,224,692.65 -- 有限公司 深圳市特力房地产交易 100 2,000,000.00 2,000,000.00 -- -- 2,000,000.00 -- 有限公司 深圳市华日丰田汽车销售 60 1,807,411.52 1,807,411.52 -- -- 1,807,411.52 -- 服务有限公司 深圳市新永通机动车检测 10 1,000,000.00 1,000,000.00 -- -- 1,000,000.00 -- 设备有限公司 Sub-total 254,839,543.61 254,839,543.61 -- -- 254,839,543.61 -- Other equity investment 深圳先导化工新材料有限公司 40 7,256,401.38 4,751,621.62 4,751,621.62 4,648,000.00 湖南昌阳实业股份有限公司 36.55 6,900,000.00 1,810,540.70 -- -- 1,810,540.70 1,800,000.00 深圳汉力高技术陶瓷 80 3,466,000.00 1,956,000.00 -- -- 1,956,000.00 1,956,000.00 有限公司 深圳捷成电子有限公司 45 3,150,000.00 3,225,000.00 -- -- 3,225,000.00 3,225,000.00 中国浦发机械工业总公司 5.30 10,176,617.20 10,176,617.20 -- -- 10,176,617.20 -- 深圳经纬实业股份有限公司 12.50 4,000,000.00 4,000,000.00 -- -- 4,000,000.00 4,000,000.00 深圳（莫斯科）股份有限公司 7.00 825,000.00 825,000.00 -- -- 825,000.00 825,000.00 武汉威特酒店 640,000.00 640,000.00 -- -- 640,000.00 640,000.00 上海市原水股份有限公司 123万股 2,761,422.92 2,761,422.92 -- 2,761,422.92 -- -- 深圳石油化工（集团）股份 10万股 700,000.00 700,000.00 -- -- 700,000.00 686,900.00 有限公司 Sub-total 37,114,018.58 28,084,779.52 -- -- 28,084,779.52 17,780,900.00 Total 291,953,562.19 282,924,323.13 -- -- 282,924,323.13 17,780,900.00 （ 3） Change of impairment provisions 66 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan Impairment provision Name of the company 31 December 31 December Increase Decrease Reason 2006 2007 深圳先导化工新材料有限公司 4,648,000.00 -- -- 4,648,000.00 *2 湖南昌阳实业股份有限公司 1,800,000.00 -- -- 1,800,000.00 *1 深圳汉力高技术陶瓷有限公司 1,956,000.00 -- -- 1,956,000.00 *1 深圳捷成电子有限公司 3,225,000.00 -- -- 3,225,000.00 *1 深圳经纬实业股份有限公司 4,000,000.00 -- -- 4,000,000.00 *1 深圳（莫斯科）股份有限公司 825,000.00 -- -- 825,000.00 *1 武汉威特酒店 640,000.00 -- -- 640,000.00 *1 深圳石油化工（集团）股份 686,900.00 -- -- 686,900.00 *2 有限公司 Total 17,780,900.00 -- -- 17,780,900.00 *1 These companies had stopped operation for years, and the investment is unexpected to recover. *2 These companies are seriously insolvent due to poor management, and the investment is unexpected to recover. 4、 Operat ing inc om es and operat ing c ost s Operating income Operating cost Operating gross profit Categories Figures in Figures in Figures in Figures in Figures in Figures in 2007 2006 2007 2006 2007 2006 Main business income Leasing service 14,776,051.62 15,529,457.1 4,270,745.56 4,162,834.75 10,505,306.06 11,366,622.3 0 5 Other business income Investment property 28,352,480.00 -- 5,030,928.49 -- 23,321,551.51 -- transferred Total 43,128,531.62 15,529,457.1 9,301,674.05 4,162,834.7 33,826,857.57 11,366,622.3 0 5 5 5、 Invest m ent inc om e Categories Figures in 2007 Figures in 2006 Gains from disposal of trading financial asset -- -- Gains from disposal of held-to-sale financial asset 20,120,452.32 -- Gains from long-term equity investment 10,142,490.71 9,244,358.63 Including ：divident gain from invested company 1,681,428.68 5,906,442.63 Gains from disposal of investment -- -- Net profit change from invested company on 8,461,062.03 3,337,916.00 equity basis 67 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan Total 30,262,943.03 9,244,358.63 There is no severe restriction on the remittance of investment gains. Not e 10. Relat ionship and t ransat ion wit h assoc iat es 1. St andards of assoc iat es The associate parties refer to those that one party can control, jointly control or have significant influence on the other party; and those that two parties or more are under control, jointly control, or significant influence by the other party. 2. Assoc iat e relat ionship (1) Associate parties except for the subsidiaries in Note 7 Share Name of the parent Registered Business Registered Voting Institute Bisiness scope holding company place trait capital proportion Code proportion% Real estate & 深圳市特发集团 Limited Shenzhen Mainland 1,582,820,000 66.22% 66.22% 192194195 有限公司 liability business (2) Change of registered capital of associates with controlling relationship (Expressed in 10, 000 RMB Yuan) 31 December 31 December Name Increase Decrease 2006 2007 深圳市特发集团有限公司 158,282 -- -- 158,282 深圳市特力新永通汽车发展有限公司 3,290 -- -- 3,290 深圳市特发特力物业管理有限公司 705 -- -- 705 深圳市特发特力房地产有限公司 3,115 -- -- 3,115 深圳市中天实业有限公司 725 -- -- 725 深圳市汽车工业贸易总公司 5,896 -- -- 5,896 深圳特发华日汽车企业有限公司 USD500 -- -- USD500 深圳市华日丰田汽车销售有限公司 200 -- -- 200 深圳市特力房地产交易有限公司 200 -- -- 200 (3) Change of shares held by associates with controlling relationship (Expressed in 10, 000 RMB Yuan) 31 December 2006 Increase Decrease 31 December 2007 Name proport proporti Amount Amount Amount Amount ion% on% 深圳市特发集团有限公司 14,587 66.22 -- -- 14,587 66.22 深圳市特力新永通汽车发展有限公司 3,290 100 -- -- 3,290 100 深圳市特发特力物业管理有限公司 705 100 -- -- 705 100 深圳市特发特力房地产有限公司 3,115 100 -- -- 3,115 100 深圳市中天实业有限公司 725 100 -- -- 725 100 深圳市汽车工业贸易总公司 5,896 100 -- -- 5,896 100 68 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan 深圳特发华日汽车企业有限公司 2,142.76 60 -- -- 2,142.76 60 深圳市华日丰田汽车销售有限公司 120 60 -- -- 120 60 深圳市特力房地产交易有限公司 200 100 -- -- 200 100 (4) Related parties without controlling relationship Name Relationship Institute number 深圳市特发天鹅实业公司 Subsidiary 192473856 深圳市机械设备进出口公司 Subsidiary 深圳市特发地产有限公司 Subsidiary 279365997 香港裕嘉投资有限公司 Subsidiary 深圳市特力房地产岳阳公司 Subsidiary 深圳市特发发展中心建设监理有限公司 Subsidiary 192260957 深圳市特力阳春房地产公司 Subsidiary 深圳市龙岗特力房地产公司 Subsidiary 深圳市特力（集团）股份公司工会 Labor union of the Company 790488804 深圳市兴龙机械模具公司 Associate 192172420 深圳市先导化工新材料有限公司 Associate 深圳市华通汽车公司 Associate 19217950X 深圳市特力汽车服务发展有限公司 Associate 767583926 深圳市仁孚特力汽车服务有限公司 Associate 774131792 深圳市驰赫汽车有限公司 Associate 深圳市汽车工业进出口公司 Associate 192190506 深圳市标远通用汽车有限公司 Associate 深圳市标远君驰有限公司 Associate 667087888 Please see Note 8.8 for the associates’ information of the Company. 3. Transac t ion wit h assoc iat es (1) Loan 1. In the reporting period, the Company borrowed RMB Yuan 19,500,000 from associates and has repaid RMB Yuan 19,500,000. 2. In the reporting period, the Company borrowed RMB Yuan 1,300,000 from the associate, Shenzhen Tellus Development Supervision Co., Ltd. (2) Earnings of borrowings Figures in Figures in Name of associates 2007 2006 深圳兴龙机械模具公司 76,041.64 25,200.00 69 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan Total 76,041.64 25,200.00 Pricing policies: bank interest rate over the same period plus 10% (3) Payments of borrowings Figures in Figures in Name of associates 2007 2006 深圳市特发集团有限公司 1,055,470.01 442,260.00 深圳市特发发展中心建设监理有限公司 755,040.00 605,523.32 Total 1,810,510.01 1,047,783.32 Pricing policies: bank interest rate over the same period plus 10% (4) Leased property The Company signed a leasing agreement with its associate, Shenzhen Ren Fu Te Li Automobile Service Co. Ltd, to lease it a land of 7,705.25 square meters and a five-floor building of 13,891.24 square meters with leasing period of 20 years started from 1 s t Juanuary 2005. In this leasing period, the Company collects RMB Yuan 5,000,000 for annual rent. From the fifth year since the first date of this leasing period, the rent will increase by 3% year-on-year. (5) Guarantee and Guaranteeed 1. As at 31 December 2007, the Company made guarantee for a loan of RMB Yuan 20,000,000 for the Shenzhen Automobile Industry & Trading Co. Ltd, meanwhile, the Company also provided bank credit guarantee of not more than USD 2,000,000 for the same company. 2. As at 31 December 2007, the Tellus Group, the controlling shareholder of the Company, made guarantee for a bank loan of RMB Yuan 24,880,000 for the Company. (6) Annual remunerations of senior executives Figures in 2007 Figures in 2006 Item Value Number Value Number Sub-total of Annual remunerations 63.49 2 35.81 1 above RMB 300,000 Sub-total of Annual remunerations 174.76 8 174.53 9 below RMB 300,000 Total 238.25 10 210.34 10 70 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan (7) Accounts receivable and accouts payable of the associates （ exclude dividends receivable & dividends payable） Balance at the end of the term Proportion in the total Item Name of the associates receivables and payables % 31 31 Dec. 31 Dec. 2007 31 Dec. 2006 Dec.2007 2006 深圳市仁孚特力汽车服务有限公司 6,642.73 122,382.80 0.01 0.13 Other accountsreceivable account payable 深圳市先导化工新材料有限公司 708,072.26 708,072.26 0.57 0.75 特力集团工会 1,200,000.00 1,200,000.00 0.96 1.27 深圳市特力汽车服务发展公司 6,625,538.10 5,551,552.50 5.31 5.86 深圳市兴龙机械模具公司 1,501,586.51 1,425,544.87 1.20 1.51 Sub-total 10,041,839.6 9,007,552.43 8.05 9.52 0 深圳市特发地产有限公司 6,054,855.46 6,054,855.46 14.52 17.27 6,054,855.46 14.52 Sub-total 6,054,855.46 17.27 Shor-term borrowings 21,524,498.0 22,074,160.0 深圳市特发集团有限公司 8.34 9.84 0 0 深圳市特发发展中心建设监理 11,000,000.0 9,700,000.00 4.26 4.32 有限公司 0 32,524,498.0 31,774,160.0 小 计 12.60 14.16 0 0 深圳市特发地产有限公司 2,395,526.25 2,395,526.25 1.45 1.53 香港裕嘉投资有限公司 2,279,955.85 2,466,598.76 1.38 1.57 深圳市特发天鹅实业公司 20,703.25 20,703.25 0.01 0.01 深圳市机械设备进出口公司 224,310.36 196,554.36 0.14 0.13 深圳市特发集团有限公司 30,452,387.5 37,327,033.3 18.41 23.83 Other account payable 9 7 深圳市龙岗特力房地产公司 1,095,742.50 1,095,742.50 0.66 0.70 深圳市阳春房地产公司 476,217.49 479,872.49 0.29 0.31 深圳市华通汽车公司 -- 2,789,055.40 -- 1.78 深圳市特发发展中心建设监理 205,730.00 750,690.00 0.12 0.48 有限公司 深圳市标远通用汽车有限公司 -- 4,693,689.41 -- 3.00 深圳市标远君弛汽车有限公司 8,829,904.03 -- 5.34 -- 深圳市弛赫汽车有限公司 3,088,590.19 2,000,000.00 1.87 1.28 49,069,067.5 54,215,465.7 Sub-total 29.67 34.62 1 9 71 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan Not e 11.P ledge of asset 1、 The original book value of fixed asset is total RMB Yuan 140,670,000 and net value RMB Yuan 104,550,000; the invested property with book value RMB Yuan 54,390,000 and net value of RMB Yuan 35,020,000 was pledged to bank, as the guaranty for a loan of RMB Yuan 129,700,000. 2、 The Company pledged bank its 95% shares of the Shenzhen Te Li Xin Yong Tong Automobile Development Co. Ltd., 50% shares of the Shenzhen Xing Long Mechanical Models Co., 60% shares of the Shenzhen Te Fa Hua Ri Automobile Co. Ltd., as the guaranty for a loan of RMB 33,000,000. 3、 35% shares of the Shenzhen Zung Fu Te Li Automobile Services Co. Ltd. held by the Company was pledged to the Zung Fu Automobile Management (Shenzhen) Co. Ltd. as the credit guarantee to bank for a loan for the Shenzhen Zung Fu Te Li Automobile Services Co. Ltd. 4、 25.23% shares of the Shenzhen Biao Yuan General Automobile Co. Ltd. held by the Group was pledged to bank, as a guaranty for a loan of RMB Yuan 11,000,000. As at 31 December 2007, the bank load was repaid, but the pledge has not been eliminated. Not e 12. Cont ingenc y 1. External guarantee As at 31 December 2007, except for the recognized predicted liabilities (See Note 8.8), the major contignecy of the Company includes its subsidiary, the Shenzhen Automobile Industry & Trading Co. Ltd, made a guarantee for bank loans for Shenzhen Automobile import and export Co.,Ltd. Details are as follows: Name of the company Guarantee Amount guaranteed Term guaranteed mode Shenzhen Automobile RMB Yuan From Aug.13, 2007 Industrial import and export Loan 20,000,000 tto Aug.13, 2008 Co.,Ltd Shenzhen Automobile From Sep.18, 2007 Industrial import and export USD 2,000,000 Letter of credit to Sep.18, 2008 Co.,Ltd 2. Significant lawsuits and arbitrations (1) In October of 2005, a lawsuit was brought before Shenzhen Fu Tian District People’s Court by the Company, which was the recognizor of Jintian Industry (Group) Co. Ltd. (“Jintian”) to require Jintian to redress RMB 4,081,830 (corpus: RMB 3,000,000, interest: RMB 1,051,380, legal fare: RMB 25,160 and executive fare: RMB 5,290, which were all dealt as a loss in last report term.). It was the amount money that was distrained forcibly. The Fu Tian District 72 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan People’s Court had adjudged that the Company won the lawsuit and the forcible execution had been applied by the Company. (2) In October of 2005, a lawsuit was brought to Shenzhen Fu Tian District People’s Court by the Company, which is the recognizor of Shenzhen Zhong Hao (Group) Co. Ltd. (“Zhong Hao”) to require Jin Hao to redress RMB 16,620,000 (corpus: RMB 11,500,000, interest: RMB 5,000,000, legal fare and evaluating fare: RMB 120,000, which were all dealt as a loss in last report term.). The Fu Tian District People’s Court had adjudged that the Company won the lawsuit and the forcible execution had been applied by the Company. (3) The Company signed a “Guarantee Contract for a limited loan” with Shenzhen Petroleum & Chemical Limited Company (“Petroleum & Chemical Limited”) and China Agricultural Bank Shenzhen Shangbu Subbranch on 14 December 1995. Our company guaranteed Petroleum & Chemical Limited to borrow a loan of RMB57,600,000 from China Agricultural Bank Shenzhen Shangbu Subbranch, which would expire on 14 December 2000. On 29 December 2000, China Agricultural Bank Shenzhen Branch, China Grate wall Asset Management Corporation Shenzhen Branch (“Grate wall Corporation Shenzhen Branch” ) and Petroleum & Chemical Limited signed an “Loan for Investment & Stock Transfer Agreement ”. Three parties agreed that China Agricultural Bank Shenzhen Branch would transfer a loan of RMB 270,000,000 (the above-mentioned loan of RMB 57,600,000 included), that he extended to Petroleum & Chemical Limited, to Great Wall Corporation Shenzhen Branch, as a way of investment. In the agreement, they promised that “From the date on which the contract become effective, Party A, Grate wall Corporation Shenzhen Branch, will be entitled with the rights as a investor; Party B, China Agricultural Bank Shenzhen Branch, will not be a lender again. “The agreement will become effective with the signatures of the representatives or agents from the three parties”. On the same date, Great wall Corporation Shenzhen Branch, Petroleum & Chemical Limited and Shenzhen Petroleum & Chemical Group Limited Company (“Petroleum & Chemical Group”) signed an “Agreement”. Three parties agreed that Grate wall Corporation Shenzhen Branch changed his investor’s equity of RMB 270,000,000 in Petroleum & Chemical Limited as the investment returns in Petroleum & Chemical Group. Meanwhile, Petroleum & Chemical Group and Great Wall Corporation Shenzhen Branch signed a “Stock Transfer Contract”. They agreed that Great Wall Corporation Shenzhen Branch would use his investment returns of RMB 270,000,000 in Petroleum & Chemical Group to invest as a stockholder in a newly-registered company of Petroleum & Chemical Group. The contract “will become effective with the signatures and chops from the two parties”. 73 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan On 20 August 2004, the China Agricultural Bank Shenzhen Branch claimed that “Agreement”, “Loan for Investment & Stock Transfer Agreement” and “Stock Transfer Contract” have not been carried out. They appealed to the Shenzhen Municipal Court and required the borrower, Petroleum & Chemical Limited, to repay the loan of RMB 57,600,000, interest of RMB 16,652,286.37 and other overdue penalty. He also required our company to assure the guarantee responsibility. On 9 May 2006, the Company received the civil judgment of (2004) Shen Zhong Fa Min No. 437 from the Shenzhen Intermediate People’s Court. In its judgment of first instance, the Shenzhen Intermediate People’s Court ordained that the Company should assume the joint liability of satisfaction for the loan of Petroleum & Chemical Limited. The Company shall repay the loan principal of RMB 57,600,000 and interests to the China Agricultural Bank Shenzhen Shangbu Subbranch, within 10 days upon effectiveness of this judgment. (The interests should be calculated in accordance with the overdue interest rate for the loan of the corresponding period issued by the People’s Bank of China from 30 December 2000 to the date of liquidation.) As Petroleum & Chemical Limited was delisted and its assets were seized by the creditors, the Company made provision of RMB 87,568,728.57for the relevant loss, in accordance with the Accounting Regulations for Business Enterprises. The Company refused to accept the above-mentioned verdict and appealed to the Guangdong Provincial Higher People's Court (hereinafter referred to the Guangdong Higher Court). The Guangdong Higher Court rejected the appeal and upheld the original verdict by the Civil Judgement [2006] No. 172. The Company refused to accept the verdict of the Guangdong Higher Court and submitted Civil Retrial applications and asked for Revocation of Civil Judgement of [2004]No.437 and [2006] No. 172 by the Shenzhen Intermediate People's Court and the Guangdong Higher Court respectively. The Guangdong High Court accepted the application for retrial and convicted to retrial this case by Civil Judgement [2007]No.682. During the retrial, the enforcement of the lawsuit has been suspended.And the case has enter the trial supervision procedure in the Guangdong Higher Court. (4) Shenzhen Tellus Real Estate Development Co. Ltd. (“Real Estate Co.”), a wholly-owned subsidiary of the Company, entered into a Joint Property Construction Contract with Shenzhen Jinlu Industrial and Trade Company (“Jinlu Company”) on 29 November 1994 to build a real estate in Shenzhen. Real Estate Co. paid RMB 9,800,000 to Jinlu Company as of 31 December 1996. However, Jinlu Company breached the contract and cooperated with Guangzhou Military Area Shenzhen Property Administrative Department (“GMAA”) to develop the real estate and paid the RMB9,800,000 received from Real Estate Co. to GMAA. Therefore, Real Estate Co. lodged a claim against Jinlu Company. The Futian District People’s Court admitted GMAA as the third party of this case according to the law of the PRC. It was ruled by the Futian District 74 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan People’s Court that the contract was of no effect; GMAA shall repay Jinlu Company the principal of RMB9,800,000 plus interests, which shall be transferred to Real Estate Co. within three days of the reception by Jinlu Company. GMAA applied for further trial that was allowed, and the original judgement was suspended during the retrial. Since the target of the litigation was located out of Futian District, the second trial was undertaken by the Shenzhen Intermediate People’ Court on 18 March 2003, which overruled the judgment of the Futian District People’s Court. The Shenzhen Intermediate People’s Court admitted that the original contract entered between Real Estate Co. and Jinlu Company is still effective. The Group has made provision of RMB4,900,000. As Real Estate Co. is still under negotiation with Jinlu Company, in the opinion of directors, no further provision is deemed necessary as of the balance sheet date. Up to the date of the approval of these financial statements, the settlement consultation of the two parties is still on going. (5) Ji Jianjun, Zhou Linxia, together with other 40 property owners, purchased the houses and stores in the Yueyang Te Li Plaza, that were developed by the Yueyang Subsidiary of Shenzhen Te Li Real Estate Company (“the Yueyang Company”), between 1995 and 1998. Owning to the quality problem of the plaza, they took the Yueyang Company, the Company, Shenzhen Te Li Real Estate Company (the Company’s subsidiary), and the Shenzhen Te Fa Group (the holding shareholder of the Company) to court. On 12 October 2006, the Yueyang County People’s Court adjudged that the Yueyang Company should redress RMB 2,980,000 to the plaintiffs for compensation. The Company, Shenzhen Te Li Real Estate Company and Shenzhen Te Fa Group should assume joint liability. The force of the case took effect and already finised. The Company has appealed to the Hunan Provincial Higer people’s Court and the Hunan Provincial Higer Procuratorate. Fu Yuansi, Wu Shenbao, together with other 64 property owners of Yueyang Te Li Plaza, took the Yueyang Company, the Company, Shenzhen Te Li Real Estate Company (the Company’s subsidiary), and the Shenzhen Te Fa Group (the holding shareholder of the Company) to court for the same reason. On 26 December 2007, the Yueyang County People’s Court adjudged, by Civil Judgement [2007] No.10, that the Yueyang Company should lifted the contracts for the sale of housing with the plaintiff and the plaintiff should return the houses to Yueyang Company, which should be performed within three monthes since the effectiveness of the judgement; and the Yueyang Company, the Company, Shenzhen Te Li Real Estate Company and the Shenzhen Te Fa Group should repay the plaintiff RMB Yuan 6,572,025 for compensation, which should be performed within five days since the effectiveness of the judgement. The company refused to accept the ruling and appeal has been filed. Not e 13.Com m it m ent issues The Company has no material commitment issue need to be disclosed as at the end of this reporting period. 75 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan Not e 14.It em s in t he post -balanc e sheet dat e issues The board of directors of the Company passed the Annual Profit Distribution Plan of 2007 on 15 April 2008, which decided that there was no profit distribution for 2007 and no capital increase out of earnings or capital reserves. The Plan has not been approved by the Company ‘s general meeting of shareholders. Not e 15. Ot her im port ant event s There is no other important evernts to disclose. Not e 16. Com parat ive f igures The figures of 2006 in the financial statements have been adjusted according to the reporting method of the year 2007. Suplem ent ary m at erials： 1. Non-recurring prof it s and losses The non-recurring profits and losses of the Company in the reporting period are as follows: Item Value Profits and losses from disposal of non-current assets (4,934,272.76) (non-capital assets) Profits and losses from transferring equity investment (148,909.19) Profits and losses from seeling financial assets available for sale 20,120,452.32 Earnings from borrowings to non-financail enterprises that were 76,041.64 included in the current profits and losses Profits and losses from the exchange of non-monetary assets 23,321,551.51 Profits and losses from liability restructuring 1,268,742.96 Net balance of other operations (1,079,507.21) Staff welfare payable deducting the current general and 3,088,230.76 administrative expenses Less:profit and loss of the minor shareholder 3,624,505.60 Deducting the influence of income tax (6,256,849.50) Total 39,079,986.13 The above-mentioned non-recurring profits and losses were prepared in accordance to the standards in the Information Disclosure Standards for Listed Companies No. 1-- Non-recurring Profits and Losses issued by the China Securities Regulatory Commission. 2. Rat e of ret urn on net assest and earnings per share 76 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan Profits Rate of return on net Earnings per share In the assets (%) ( RMB Yuan/Per share) Item reporting Weighted Weighted period Average average Average average 2007 Net profits attributable to the Company’s common 10,795,254.16 6.93 7.08 0.0490 0.0490 shareholders Net profits attributable to the Company’s common shareholders by deducting (28,284,731.97) (18.14) (18.54) (0.1284) (0.1284) the non-reocurring profits and losses Relevant financial index of 2006 after recaculation： Profits Rate of return on net Earnings per share In the assets (%) ( RMB Yuan/Per share) Item reporting Weighte Weighted period Average d average Average average 2006 Net profits attributable to the Company’s common (87,991,436.55) (59.80) (46.03) (0.3994) (0.3994) shareholders Net profits attributable to the Company’s common shareholders by (5,818,085.31) (3.95) (3.04) (0.0264) (0.0264) deducting the non-reocurring profits and losses （ 1） The caculating fomula for the average rate of return on net assets is as follows: Average rate of return on net assets =P÷E P represents the net profits attributable to the Company’s common shareholders by deducting the non-reocurring profits and losses. E represents the net profist attributable to the Company’s common shareholders at the end of the reporting period. （ 2） The caculating fomula for the weighted average rate of return on net assets is as follows: (ROE)： Weighted average rate of return on net assets = P/(E0+NP÷2+Ei×Mi÷M0－ Ej×Mj÷M0±Ek×Mk÷M0) 77 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan P represents the net profits attributable to the Company’s common shareholders by deducting the non-reocurring profits and losses. NP represents the net profist attributable to the Company’s common shareholders at the end of the reporting period. E0 represents the net profits attributable to the Company’s common shareholders at the beginning of the reporting period. Ei represents the increase of net assets attributable to the Company’s common shareholders by the new shares or debts to equity swap during the reporting period. Ej represents the decrease of net assets attributable to the Company’s common shareholders by repurchasing or cash dividends during the reporting period. M0 represents the number of monthes during the reporting period. Mi represents the number of monthes from the second month of increase of net assets to the end of the reporting period. Mj represents the number of monthes from the second month of decrease of net assets to the end of the reporting period. Ek represents the variation of net assets due to other transations or contingency. Mk represents the number of monthes from the second month of variation of net assets to the end of the reporting period. （ 3） The caculating fomula for basic earnings per share is as follows: Basic earnings per shar=P÷S S=S0+S1+Si×Mi÷M0－ Sj×Mj÷M0－ Sk P represents the net profits attributable to the Company’s common shareholders by deducting the non-reocurring profits and losses. S represents the weighted average of issued common shares. S0 represents the total of shares at the beginning of the reporting period. S1 represents the increase number of shares due to capital increase out of accumulation fund or stock dividends distribution during the reporting period. 78 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan Si represents the increase number of shares due to the newly issued shares or debt to equity swap during the reporting period. Sj represents the decrease number of shares due to repurchasing during the reporting period. Sk represents the decrease number of shares during the reporting period. M0 represents the number of monthes during the reporting period. Mi represents the number of monthes from the second month of the increase of shares to the end of the reporting period. Mj represents the number of monthes from the second month of the decrease of shares to the end of the reporting period. （ 4）The caculating fomula for diluted earnings per share is as follows: Diluted earnings per share =[P+(diluted potential common share dividends that have been recognized as expenses-swap expenses)×(1-income tax rate)]/(S0+S1+Si×Mi÷M0 － Sj×Mj÷M0—Sk+weighted average of the increase of common shares out of warrants, stock options and convertible bonds) P represents the net profits attributable to the Company’s common shareholders by deducting the non-reocurring profits and losses. 3. Net profit reconciliation statement of 2006 under the new and existing Accounting Standards Assume that the new Accounting Standards No1-37 became effective at the beginning of 2006. The material difference of net profits under the new and existing Accounting Standards was analyzed and listed in the following net profit reconciliation statement: Item Amount Net profits of 2006 (the Existing Accounting Standards) (92,148,791.60) 79 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan Add：sub-total of influence by tracing adjusted items 2,622,314.59 include： 1,340,345.93 Earnings from deferred income tax Losses from recognition of unrecognized investment (399,533.06) Profits and losses of minority interests 182,255.97 influence of tracing adjusted items by cost method in 1,499,245.75 subsidiary Net profits attributable to parent company of 2006 (89,526,477.01) (the New Accounting Standards) Tracing adjusted items of B shares companies (the New Accounting Standards) Add： 1,535,040.46 Sub-total of influence of other items Profits of liability restructuring 1,484,198.82 Earnings of borrowings from associates 50,841.64 Stimulated net profits of 2006 (87,991,436.55) 4. Dif f erenc es bet ween IFRS and P RC A c c ount ing Standards on Financial Statements After the adoption of the New Accouting Standards since 1st Juanuary 2007, there is no significant difference in financial statements based on the IFRS or the PRC Accounting Standards. On the adoption date, the Company already made tracing adjustment and accounting errors’ correction. The adjustments are as follows: Net profits as at 31 Net profits of 2006 December 2006 The amount of 2006 130,812,819.06 (88,603,912.10) (Based on the IFRS ) The tracing adjustment of changes of 11,724,506.98 612,475.55 accounting policy 80 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2007 Expressed in RMB Yuan 1. The tracing adjustment of resignation (9,013,636.92) -- welfare 2. The adjustment of fair values of 5,490,660.35 -- financial assets available for sale 3. Recognition of deferred income 21,740,755.13 1,340,345.93 tax assets and liabilities 4. Investment real estate by cost (4,025,496.25) (2,195,000.00) method 5. Differences by tracing adjustment of consolidation of erterprise under the (2,467,775.33) 1,467,129.62 same control The tracing adjustment of accouting 4,617,000.00 -- errors’ correction Capitalization of fixed assets interests 4,617,000.00 -- of previous year The amount of financial statements after the tracing adjustment based on the 147,154,326.04 (87,991,436.55) IFRS Section XI. Documents Available for Reference Complete sets of documents are placed in the Company’s office for the reference of the CSRC, SSE, relevant authorities and vast numbers of investors, including: 1. Original of 2007 Accounting Statements carried with the signatures and seals of the legal representative, Chief Financial Officer and manager of Plan & Financial Dept.; 2. Original of the Auditors’ Report carried with the seal of Certified Public Accountants as well as the signatures and seals of certified public accountants(Chinese and English version). 3. Original of the Company’s documents and manuscripts of the public notices disclosed in the newspapers designated by the CSRC; 4. Annual Report or its summary published in other stock exchange. Signature of Chairman of the Board: Zhang Ruili Board of Directors of ShenZhen Tellus Holding Co., Ltd. April 17, 2008 81