*ST盛润B(200030)2007年年度报告（英文版）

GUANGDONG SUNRISE HOLDINGS CO., LTD. Annual Report 2007 April 15, 2008 0 Important Notes The Board of Directors of Guangdong Sunrise Holdings Co., Ltd. (hereinafter referred to as the Company) and the Directors individually and collectively accepted responsibility for the correctness, accuracy and completeness of the contents of this report and confirm that there was no false information, misleading statement or material omissions. Shenzhen Dahua Tiancheng Certified Public Accountants issued an auditors’ report with disclaimer of opinion. The Board of Directors issued the special explanation on relevant events, and the Supervisory Committee expressed the clear opinion for the special explanation issued by the Board of Directors. Investors were requested to pay attention on it. None of Director, Supervisor or Senior Executive stated that he/she couldn’t ensure the correctness, accuracy and completeness of the contents of the Annual Report nor had any objection for this report. All Directors of the Company attended this Meeting of Board of Directors. Chairman of the Board of the Company, Mr. Wang Jianyu; Person in charge of Accounting Affairs, Mr. Ao Yingchun; Person in charge of Accounting Organization, Mr. Yu Deshan hereby confirmed that the Financial Report enclosed in the Annual Report was true and complete. 1 Contents Section I Company Profile..............................................................................................3 Section II Summary of Financial Highlights and Accounting Highlights.......................4 Section III Changes in Share Capital and Shareholders...................................................6 Section IV Particulars about the Directors, Supervisors, Senior Executives and Employees........................................................................................................................10 Section V Corporate Governance.....................................................................................16 Section VI Shareholders’ General Meeting......................................................................21 Section VII Report of the Board of Directors..................................................................22 Section VIII Report of the Supervisory Committee.........................................................27 Section IX Important Events............................................................................................29 Section X Financial Report..............................................................................................40 Section XI Documents for Reference...............................................................................86 Note I. Auditor’s Review Opinions on Reconciliation Statement for Shareholders’ Equity Difference between New and Old Accounting Standards and Reconciliation Statement for Shareholders’ Equity Difference between New and Old Accounting Standards Note II. Statement of Provision for Impairment of Assets and Changes in Owners’ Equity (Shareholders’ Equity) 2 Section I Company Profile I. Legal name of the Company in Chinese: 广东盛润集团股份有限公司 Legal name of the Company in English: Guangdong Sunrise Holdings Co., Ltd. (Abbreviation: SUNRISE) II. Legal Representative: Wang Jianyu III. Secretary of the Board of Directors: Ao Yingchun Contact Tel: (0755)83877511 Securities Affairs Representative: Chen Liantan Contact Tel: (0755) 83875531 Contact Address: Secretariat, on 4th Floor East, Block 203, Tairan Industrial Zone, Chegongmiao, Shenzhen Fax: (0755)83875212 E-mail: lionda@mailcenter.com.cn IV. Registered Address: Tairan Industrial Zone, Chegongmiao, Shenzhen, Guangdong, P. R. China Office Address: 4th Floor East, Block 203, Tairan Industrial Zone, Chegongmiao, Shenzhen Post Code: 518040 V. Newspapers Chosen for Disclosing the Information of the Company: Securities Times and Ta Kung Pao Internet Website Designated by CSRC for Publishing the Annual Report: http://www.cninfo.com.cn/default.htm The Place Where the Annual Report is Prepared and Placed: Secretariat of the Board of the Company VI. Stock Exchange Listed with: Shenzhen Stock Exchange Short Form of the Stock: S*ST Sunrise A, *ST Sunrise B Stock Code: 000030, 200030 VII. Other Relevant Information of the Company: The initial registration of the Company: Date: Sep. 1993 Place: Jiahua Bldg., Huaqiang North Road, Shenzhen Registered code of enterprise legal person’s business license: 4400001001658 Registered code of tax: SNTZi 440301190325278 SLTZi 440304190325278 Name of Certified Public Accountants engaged by the Company: Shenzhen Dahua Tiancheng Certified Public Accountants Office Address: 11th Floor, Tower B, Union Plaza, Bin He Road, Shenzhen 3 Section II Summary of Financial Highlights and Accounting Highlights I. Major profit index of the Company in current year 1. Major profit index in current year (Unit: RMB Yuan) Operating profit 0 Total profit -22,075,217.13 Net profit attributable to the shareholders in listed companies -22,075,217.13 Net profit attributable to the shareholders in listed companies after deducting -24,381,666.76 non-recurring gains and losses Net cash flow arising from operation activities -3,178,361.53 2. Items of the non-recurring gains and losses (Unit: RMB Yuan) Items of non-recurring gains and losses Amount Net gains and losses on disposal of long-term investment 1,556,948.91 Provision for impairment withdrew and liabilities swishing 699,460.72 back Net income/expense from non-operation 50,040.00 Total 2,306,449.63 3. Difference in net profit as audited under PRC GAAP and IFRS: (Unit: RMB Yuan) PRC GAAP IFRS Net profit -22,075,217.13 -22,075,217.13 Net assets -1,638,393,498.52 -1,638,393,498.52 Explanation on difference PRC GAAP and IFRS were almost same , which resulted in no difference II. Major accounting data and financial index over the past three years 1. Major accounting date (Unit: RMB Yuan) Increase/ decrease Item 2007 2006 2005 than last year (%) Before adjustment After adjustment After adjustment Before adjustment After adjustment Operating income 0.00 81,842,030.77 81,842,030.77 Net profit -22,075,217.13 18,660,262.04 18,660,262.04 -218.30% -52,275,527.36 -52,275,527.36 Net profit attributable to shareholders in listed -22,075,217.13 18,660,262.04 18,660,262.04 -218.30% -57,181,772.54 -57,181,772.54 company 4 Net profit attributable to shareholders in listed company after -24,381,666.76 -16,238,046.00 -16,238,046.00 -58.08% -65,950,923.81 -65,950,923.81 deducting non-recurring gains and losses Net cash flow arising from operation -3,178,361.53 -84,197.08 -84,197.08 3,764.91% 27,499,312.61 27,499,312.61 activities At the end of Increase/ decrease At the end of 2006 At the end of 2005 2007 than last year (%) Before adjustment After adjustment After adjustment Before adjustment After adjustment Total assets 27,154,777.79 29,826,870.27 29,826,570.27 -8.96% 39,195,650.77 39,195,650.77 Owners’ equity -1,638,393,498.5 -1,616,318,281.39 -1,616,318,281.39 -1.37% -1,649,171,767.48 -1,649,171,767.48 (shareholders’ equity) 2 2. Major financial index (Unit: RMB Yuan) Increase/ Item 2007 2006 decrease than last 2005 year (%) Before adjustment After adjustment After adjustment Before adjustment After adjustment Basic earnings per share -0.0765 0.0647 0.0647 -218.24% -0.1983 -0.1983 Diluted earnings per share -0.0765 0.0647 0.0647 -218.24% -0.1983 -0.1983 Basic earnings per share after deducting non-recurring -0.0845 -0.0563 -0.0563 58.08% -0.2287 -0.2287 gains and losses Fully diluted return on equity Weighted average return on equity Fully diluted return on equity after deducting non-recurring gain and loss Weighted Average return on equity after deducting non-recurring gain and losses Net cash flow per share from -0.01 -0.0003 -0.0003 -3,433.33% 0.0953 0.0953 operating activities Increase/ At the end of Item At the end of 2006 decrease than last At the end of 2005 2007 year (%) Before adjustment After adjustment After adjustment Before adjustment After adjustment Net assets per share attributable to listed -5.68 -5.60 -5.60 -5.7180 -5.7180 companies’ shareholders 5 Note: Because the net profit was negative in the year of 2005, 2006 and 2007, so it was no necessary to calculate corresponding return on equity. 6 Section III Changes in Share Capital and Shareholders I. Changes in share capital (I) Changes in share capital (Unit: share) Before the change Increase/decrease in this change After the change Capitaliza Issuance Bonus tion of Number Proportion of new Others Subtotal Number Proportion shares public share reserve I. Unlisted circulation shares 208,560,000 72.31% 208,560,000 72.31% 1. Shares held by sponsors 191,400,000 66.36% 191,400,000 66.36% Including: Shares held by state 191,400,000 66.36% 191,400,000 66.36% domestic legal person shares Overseas legal person shares Others 2. Private placement of legal 17,160,000 5.95% 17,160,000 5.95% person shares 3. Inner employee shares 4. Reference shares II. Listed circulation shares 79,860,000 27.69% 79,860,000 27.69% 1. RMB ordinary shares 40,260,000 13.96% 40,260,000 13.96% 2. Domestically listed foreign 39,600,000 13.73% 39,600,000 13.73% shares 3. Overseas listed foreign shares 4. Others III. Total shares 288,420,000 100.00% 288,420,000 100.00% (II) Share placing and listing 1. The Company issued neither new shares nor derivative securities over the previous three years as at the end of the report period. 2. The total shares and structure of shares remained unchanged in the report period. The company has no inner employee shares. II. Particulars about the shareholders 1. At the end of the report period, the Company had totally 13,729 shareholders, including 5 ones of non-tradable shares, 8,870 ones of tradable A shares, and 4,859 ones of tradable B shares. 2. The top ten shareholders (Ended Dec. 31, 2007) (Unit: share) 7 Total number of shareholders 13,729 Shares held by the top-ten shareholders Number of Number of Nature of Total number Name of shareholders Proportion non-tradable shares pledged shareholders of shares held shares held or frozen State-owned Shenzhen Lionda Group Co., Ltd. 66.36% 191,400,000 191,400,000 191,400,000 shareholder Shenzhen Coloured Metal Financial Co. Ltd. Other 1.83% 5,280,000 5,280,000 0 Shenzhen International Trust & Investment Co., Ltd. Other 1.83% 5,280,000 5,280,000 0 Shenzhen Huachengda Investment Holding Co., Ltd. Other 1.37% 3,960,000 3,960,000 3,960,000 Shenzhen Guoyin Investment Development Co., Ltd. Other 0.92% 2,640,000 2,640,000 2,640,000 Liuzhou Jiali Real Estate Development Co., Ltd. Other 0.63% 1,810,000 0 Foreign CHINA EVERBRIGHT HOLDINGS CO.LTD 0.50% 1,429,798 0 investor Su Ming Other 0.38% 1,110,000 0 Foreign Xiao Dailan 0.30% 857,878 0 investor Foreign Deng Zhi 0.19% 559,700 0 investor Note (1): Shenzhen Lionda Group Co., Ltd. was the controlling shareholder of the Company, and the shares held were state-owned legal person shares, (On Jan. 17, 2008, China Securities Depository and Clearing Corporation Limited Shenzhen Branch changed the “state-owned shares” to “other domestic legal person shares”, please refer to following text for detail information) which were not listed for trade. There exists no associated relationship among top ten shareholders each other, and there wasn’t any “action-in-concert” as described by the Administrative Measures of Information Disclosure on Change of Shareholding for Listed Companies. The Company was unknown whether there existed associated relationship among other shareholders with tradable shares, or whether they were “action-in- concert” described by the Administrative Measures of Information Disclosure on Change of Shareholding for Listed Companies. (2) Among the top ten shareholders, Shenzhen Lionda Group Co., Ltd. held the sponsor shares still with nature of state-owned legal person shares. The application of changing the nature of shares from the “state-owned legal person shares’” to “social legal person shares” of Shenzhen Lionda Group Co., Ltd. was approved by State-owned Assets Supervision and Administration Commission of the State Council. The Company transacted the related change registration procedure with the above approval in China Securities Depository and Clearing Corporation Limited and China Securities Depository and Clearing Corporation Limited Shenzhen Branch changed it to “other domestic legal person shares” on Jan. 17, 2008. For further information of above mentioned matters, please referred to the “Suggestive Public Notice on Implementation of Share Merger Reform with 2008-001 in Securities Times on Jan. 7, 2008 and Suggestive Public Notice on Implementation Share Merger Reform with 2008-005 in http://www.cninfo.com.cn on Jan. 21, 2008 8 (3) In accordance with List of Top Ten Shareholders Holding Legal Person Share of List Companies offered by China Securities Depository and Clearing Corporation Limited Shenzhen Branch on Jan. 2, 208, the 191.40 million legal person shares of the Company held by Shenzhen Lionda Group Co., Ltd., 3.96 million legal person shares of the Company held by Shenzhen Huachengda Investment Holding Co., Ltd., 2.64 million legal persons’ shares of the Company held by Shenzhen Guoyin Investment Development Co., Ltd were judicially frozen. The information of judicially freezing 191.14 million legal person shares of the Company held by Shenzhen Lionda Group Co., Ltd, the controlling shareholder of the Company; please refer to Complementary Public Notice of Judicially Freezing the Equity of the Controlling Shareholder with 2008-003 in Securities Times, Ta Kung Pao and http://www.cninfo.com.cn on Jan. 14, 2008. 3. The Company has no other shareholders holding 10% of the Company’s legal person shares. 4. Particulars about the controlling shareholder and actual controller (1) The Controlling shareholders Shenzhen Lionda Group Co., Ltd., the controlling shareholder of the Company, was incorporated in Jun. 1997 with registered capital of RMB 586.49 million. Mr. Yang Fenbo was the legal representative. The company was involved in investing and starting of industrial (subject to report individually), domestic commerce, goods supplying (special and monopolized goods not included), international trading (as set by the qualification certification), and developing of land No. T306-0013. (2) The actual controllers Shenyang Huirong Industrial Co., Ltd. and Mr. Guo Tao were the actual controllers of the Company. Through the self-inspection in the 3rd Quarter 2007 of the Company, 407 employees from the union of Shenzhen Lionda Group Co., Ltd together with the union of Shenzhen Yili Industrial Co., Ltd. held 100.00 million shares of the Shenzhen Lionda Group Co., Ltd. in total. These 100.00 million shares of Shenzhen Lionda Group Co., Ltd. were managed by Shenyang Huirong Industrial Co., Ltd. in trust through signing Share Transferred and Trusted Agreement on Dec. 31, 2004, and would transact the transferred procedure once the conditions in line with the laws and regulations qualified. Subsequently, Shenyang Huirong Industrial Co., Ltd. became the actual controller of Shenzhen Lionda Group Co., Ltd. The investment of Shenyang Ronghui Industrial Co., Ltd. as follows: Zhao Shufan with RMB 30.00 million, Guotao with 70.00 million, Therefore, Shenyang Huirong Industrial Co., Ltd. and Guo Tao become the actual controller of Guangdong Sunrise Holdings Co., Ltd. However, it was attributable to trusting conduct that 100.00 million shares of Shenzhen Lionda Group Co., Ltd. were managed by Shenyang Huirong Industrial Co., Ltd. in trust through Share Transferred and Trusted Agreement on Dec. 31, 2007, what’s more, the condition in lines with laws and regulations of transferring was not qualified, so the transferred procedure with industry and commercial organization was finished not yet, Therefore, the Company didn’t perform the duty of disclosing information on changing the actual controller. But the Company published the actual situation on public notice ( For further information, please refer to Rectification Report on Special Inspection on Corporate Governance of Listed Companies from 9 Shenzhen Securities Bureau on Oct. 30, 2007) with content that: On one side, the Company would perform its duty to disclose information in line with Regulations on Takeover of Listed Companies from CSRC, on the other side, the Company would supervise and urge Shezhen Lionda Group Co., Ltd., actual controller of the Company to perform obligation to disclose related information. Information of legal actual controller: Shenyang Huirong Industrial Co., Ltd. was founded on Oct. 28, 1999 with registered capital RMB 100.00 million, the legal representative was Zhao Shuyuan. And the scope of business included: enterprise management; production and sale of purified water, mountain spring water, drinks, drinking water equipment, household appliance equipment; hardware and electrical appliance, decoration materials, grocery wholesale industry, retail, manufacture and sale of PC barrel. (3) Chart of the property and controlling relationship between the Company and the actual controller: Guo Tao 70% Shenyang Huirong Industrial Co., Ltd. 100% Shenzhen Lionda Group Co., Ltd. 66.36% Guangdon Sunrise Holdings Co., Ltd. 4. Particulars about the top ten shareholders of tradable shares (Unit: Share) Name of shareholder Amount of tradable shares Type of share Liuzhou Jiali Real Estate Development Co., Ltd. 1,810,000 RMB ordinary share CHINA EVERBRIGHT HOLDINGS CO.LTD 1,429,798 Domestically listed foreign share Su Ming 1,110,000 RMB ordinary share Xiao Dailan 857,878 Domestically Listed foreign share Deng Zhi 559,700 Domestically listed foreign share Wu Shuping 480,000 RMB ordinary share Ni Min 470,000 Domestically listed foreign share Gao Shaohua 458,100 Domestically listed foreign share Xu Yongshan 425,900 RMB ordinary share Li Dong 410,000 Domestically listed foreign share 10 Chen Jianxiong 393,300 Domestically listed foreign shares The Company was unknown whether there existed associated relationship or belonged to “action-in-concert” among top 10 tradable shareholders of the Company each other Explanation on associated or between the top 10 tradable shareholders and legal person shareholders; in relationship or action-in-concert accordance with Administrative Measures of Information Disclosure on Change of Shareholding for Listed Companies. Section IV Particulars about the Directors, Supervisors, Senior Executives and Employees I. Directors, Supervisors and Senior Executives 1. Basic information of the current Directors, Supervisors and Senior Executives Name Title Sex Age Beginning End Number of Number Reason Amount of Stock incentive in the report period Whether 11 date of date of shares at of shares for payment received office term office the at the change drawing from Market payment Number of term year-begin year-end the Number price of from share Exercise Company in of shares stock at related could price the report exercised the units exercise period ( Unit: period-end RMB’0000) Chairman of May 24, May 24, ang Jianyu Male 42 0 0 16.20 0 0 0.00 0.00 No the Board 2005 2008 GM, May 24, May 24, Yingchun Secretary of Male 39 0 0 13.40 0 0 0.00 0.00 No 2005 2008 the Board May 24, May 24, e Heng Director Male 36 0 0 0.50 0 0 0.00 0.00 Yes 2005 2008 May 24, May 24, Deshan Director Male 30 0 0 10.20 0 0 0.00 0.00 No 2005 2008 Independent May 24, May 24, o Shiping Male 50 0 0 3.00 0 0 0.00 0.00 No Director 2005 2008 Independent May 24, May 24, a Hong Male 40 0 0 3.00 0 0 0.00 0.00 No Director 2005 2008 Independent May 24, May 24, n Wu Male 62 0 0 3.00 0 0 0.00 0.00 No Director 2005 2008 May 24, May 24, ng Yiheng Supervisor Female 35 0 0 0.30 0 0 0.00 0.00 Yes 2005 2008 May 24, May 24, u Suyan Supervisor Female 51 6,000 6,000 10.60 0 0 0.00 0.00 No 2005 2008 May 24, May 24, en Hong Supervisor Female 37 0 0 9.90 0 0 0.00 0.00 No 2005 2008 Total - - - - - 6,000 6,000 - 70.10 0 0 - - - Notes: (1) In the report period, all Directors, Supervisors and Senior Executives did not hold shares of the Company except that Supervisor Niu Suyan held 6000 A shares of the Company. (2) Office title of current Directors and Supervisors taking in shareholding companies: Director Mr. Xie Heng took the posts of Deputy Head of Investment & Development Dept. in Shenzhen Lionda Group Co., Ltd. with the office term from Jan. 2005 up to now, and received the payment from shareholding companies. Chairman of the Supervisor Committee Ms. Gong Yiheng took the posts of Deputy Head of Auditing and Inspection Dept in Shenzhen Lionda Group Co., Ltd. with the office term from Jan. 2005 up to now, and received the payment from shareholding companies. 12 2. Main work experience of Directors, Supervisors and Senior Executives and office title taken in other companies other than shareholding companies (1) Directors Mr. Wang Jianyu, Chairman of the Board, male, Han nationality, born in August 1965, from Shenyang Liaoning, CPC member, graduated as economics management major of Correspondence College in Central Communist Party, bachelor degree, economic manager. From 1981 to 1985, he served in the certain army of Chinese People’s Liberation Army; From Dec. 1985 to Sep. 1987, promotion officer in the party committee of Shenyang Computer Factory; From Sep. 1987 to Jul. 1989, off-the-job training in the Party School of Shenyang of CPC; From Jul. 1989 to Nov. 1991, director of enterprise administrative office in Shenyang Computer Factory; From Nov. 1991 to Sep. 1998, he successively took the posts of secretary to President, deputy director of President’s office, director of party committee office in Changbai Computer Group Corporation, and secretary of the Board in Changbai Computer Co., Ltd.; From Sep. 1998 to Sep. 2004, he successively took the posts of director of president office, assistant to Chairman of the Board in Shenyang Dawncom Group Co., Ltd., and assistant to Chairman of the Board and director of president office in Shenzhen dawncom business technology and service Co.,Ltd.; From Sep. 2004 to Dec. 2004, he acted as deputy GM of Shenzhen Angel Drinking Water Equipment Co., Ltd.; From Jan. 13, 2005 to Apr. 19, 2005, he took the post of standing deputy GM in Guangdong Sunrise Holdings Co., Ltd.; From Apr. 19, 2005 to May 11, 2006, he served as GM in Guangdong Sunrise Holdings Co., Ltd.. And now he is the Chairman of the Board of Guangdong Sunrise Holdings Co., Ltd. Mr. Ao Yingchun, Director, GM, born in Feb. 1968, Han nationality, from Xin’gan Jiangxi, CPC member, graduated from Mid-south University of Industry with major of automatic engineering of automatic control engineering department, Master of engineering, engineer. From Apr. 1993 to May 1996, assistant manager of engineering dept. in Shenzhen China Bicycle Company (Holdings) Limited; From Jun. 1996 to May 1997, deputy director of personnel dept. in Shenzhen Teketai Ceramic Co., Ltd.; From Jun. 1997 to Oct. 2002, director and concurrently secretary of the Board, assistant GM, director of GM office in Shenzhen Goodyear Industrial Holdings Co., Ltd.; From Oct. 2002 to Feb. 2005, director of the executive office in Guangdong Sunrise Holdings Co., Ltd. From Mar. 2003 to now, Secretary of the Board in Guangdong Sunrise Holdings Co., Ltd.; From Apr. 19, 2005 to May 11, 2006, he served as Deputy GM in Guangdong Sunrise Holdings Co., Ltd.. And now he is the GM of Guangdong Sunrise Holdings Co., Ltd. Mr. Xie Heng, Director, male, born in Apr. 1971, Han nationality, from Shenzhen, Guangdong, CPC member, graduated from Shenzhen University with major of economic forecast and statistics, statistical manager. From Jun. 1994 to now, he successively worked in investment & development dept., human resource dept. and enterprise development dept. of Shenzhen Lionda Group Co., Ltd. Now, he acts as deputy director of investment & development dept in Shenzhen Lionda Group Co., Ltd. Mr. Yu Deshan, Director, born in Apr. 1977, Han nationality, from Zunyi, Guizhou, CPC member, graduated from Jiangxi University of Finance and Economics with major of financial management in Accounting College. From Jul. 2000 to Oct. 2002, he worked in Finance Dep. of Shenzhen Lionda Group Co., Ltd.; From Oct. 2002 to Apr. 2004, he served as Chief Finance Officer in 13 Shanghai Hengda Real Estate Development Co., Ltd.; From Apr. 2004 to Dec. 2004, he held a post in Shenzhen Lionda Technology Co., Ltd. as vice minister of Finance Dep., From Dec. 2004 to Aug. 2005, he served as Financial Supervisor in Shenzhen Yili Industrial Co., Ltd.; From Aug. 2005 to now, he has held a post in Guangdong Sunrise Holdings Co., Ltd. as Chief Finance Officer. Mr. Guo Shiping, Independent Director, male, born in Mar. 1957, from Yinan County, Shandong, Han nationality, CPC member, graduated from economic dept. of Wuhan University, doctor of economics, tutor of doctorial programme, professor; From Feb. 1985 to Aug. 1988, as lecturer, vice professor, economics department of Xiangtan University; From Sep. 1988 to Nov. 1993 teaching in economics department of Wuhan University, standing vice director and professor of Hong Kong Macau Taiwan Economics Research Centre of Wuhan University. From Dec. 1993 to Jul. 1995, he successively took the posts of deputy division chief and division chief of macro adjustment division in Political Reformation Committee of Shenzhen Municipal Government; From 1995 till present, he is working in financial department of Shenzhen University, director of the dept., tutor of doctorial programme, professor, chief of International Financial Institute. Mr. Ma Hong, Independent Director, born in Aug. 1967, Han nationality, from Taishan, Guangdong, graduated from Shenzhen University with a major of business management, college diploma, accountant, CPA, certified tax accountant. From Jan. 1989 to Feb. 1993, he was engaged in auditing in Shenzhen Jinpeng Certified Public Accountants; From Mar. 1993 to Nov. 1999, as the partner in Shenzhen Huangjia Certified Public Accounants; From Dec. 1999 to Jul. 2004, as the partner of Shenzhen Licheng Certified Public Accountants; From Jul. 2004 to now, he works in Mahong Certified Public Accountants. Mr. Ban Wu, Independent Director, born in Sep. 1946, from Dashiqiao, Liaoning, Han nationality, CPC member, bachelor degree, member of International Legal Association, member of China Legal Association, certified senior judger, director of Shenzhen Association of Judgers; From 1966 to Feb. 1968, public relationship staff in county government and CPC commission; From Mar.1968 to Jan.1982, he served as group leader, company commander, instructor, tutor, and section chief of independent division No.2 Shenyang Military Section, guarding division No.6 and Jilin Military Section; From Feb. 1982 to Jul. 1988, worked in Jilin Higher People’s Court. From Aug. 1988 to Jan. 1990, transferred temporarily to Hainan Province Qiongnan Intermediate Court and took the position of president judger of economical court; From Feb. 1990 to Jul. 2003, work in Shenzhen Intermediate Court, and successively took the posts of presiding judge of No.1 and No.2 court, also takes the job of commissioner of justice commission and member of Leading Group for the Unjust Cases. (2) Supervisors Ms. Gong Yiheng, female, Han nationality, born in Jul. 1972, from Ruanjiang, Hunan, graduated from Changsha University of Hunan with major of accounting, MBA of American Columbia University, accountant. From Jul. 1994 to Jun. 1995, she took instructor in Hunan Education University; From Jun. 1995 to Dec. 1995, she worked in Changsha Talent development Center of Hunan; From Dec. 1995 to Aug. 1999, she worked in auditing dept. of Shenzhen Lionda Group Co., Ltd.; From Aug.t 1999 to Nov. 2000, she took the post of Financial Head of Shenzhen Dongxing 14 Industrial Co., Ltd.; From Nov. 2000 to Aug. 2002, she took the post of financial head of Shenzhen Light Industry Import & Export Co., Ltd.; From 2002 to Jan. 2005, she took the post of financial head of Shenzhen Health Industrial Co., Ltd.; From Jan. 2005 till now, she took the post of deputy head of auditing and supervision dept. in Shenzhen Lionda Group Co., Ltd. Ms. Chen Hong, Han nationality, born in Apr. 1970, was from Huizhou, Guangdong. She graduated from foreign language department of Shenzhen University, undergraduate course of economics management major of the Party School of Guangdong Province of CPC, accountant. From Jul. 1990 to Sep. 1994, she worked in financial dept. of Shenzhen Mineral Water Plant; From Sep. 1994 to Dec. 2000, deputy head of financial dept. in Shenzhen Health Mineral Water Co., Ltd.; From Jan. 2001 to Feb. 2005, deputy head of financial dept. in Shenzhen Health Industrial Co., Ltd.; From Feb. 2005 till now, head of auditing dept. in Guangdong Sunrise Holdings Co., Ltd. Ms. Niu Suyan, born in Dec. 1956, Han nationality, from Kaifeng, Henan, graduated from Hubei Inspection Correspondence School, college education, CPC member, political worker. From Jan. 1974 to Feb. 1982, officer of Political Department of the 11th division commander of tank of China People’s Liberation Army; From Mar. 1982 to Aug. 1992, inspector of Hubei Province Wuhan Municipal Wuchang District People’s Procuratorate; From Sep. 1992 to Dec. 1999, she worked in law dept. of Shenzhen Lionda Group Co., Ltd.; From Jan. 2000 to Apr. 2002, deputy director of birth-planning committee and women trade union in Shenzhen Lionda Group Co., Ltd.; From Apr. 2002 to Nov. 2002, he was the director of general office in Guangdong Sunrise Holdings Co., Ltd.; From Nov. 2002 to Sep. 2004, deputy head of party-masses relationship work dept. in Shenzhen Lionda Group Co., Ltd.; From Oct. 2005 to now, she acts as director of general office in Guangdong Sunrise Holdings Co., Ltd. (3) The Senior Executives Resumes of Mr. Wang Jianyu, Chairman of the Board, and Mr. Ao Yingchun, GM and concurrently Secretary of the Board, were available in the list of Directors shown above. II. Particulars about the annual remuneration 1. Decision-making procedure of annual remuneration of the Directors, Supervisors, and Senior Executives and determination basis In the report year, the Company paid the annual remuneration to Directors, Supervisors and Senior Executives according to Rules of Compensation Management of the Company with their administrative position and their length of service. The Company paid the allowance to Independent Directors. 2. Details of the annual remuneration There were 10 persons including Directors, Supervisors and Senior Executives in office at present. Among them, 5 persons draw the annual remuneration from the Company, and the total annual remuneration (including basis wage, various premium, welfare, subsidy, housing allowance and others) received from the Company was RMB 701,000.00, one person enjoyed the annual remuneration over RMB 150,000.00; one person enjoyed between RMB 120,000.00 and RMB 150,000.00; three person enjoyed between RMB 90,000.00 and RMB 120,000.00 respectively. The 15 total amount of annual remuneration of the top three Directors drawing the highest payment was RMB 402,000.00; the total amount of annual remuneration of the top three Senior Executives drawing the highest payment was RMB 402,000.00. Among the Directors, Supervisors and Senior Executives not drawing remuneration from the Company, Director Xie Heng and Supervisor Gong Yiheng drew remuneration from the shareholding companies. In the report period, the Independent Directors of the Company drew the allowance amounting to RMB 30,000.00, some Directors of the Company drew the allowance amounting to RMB 5,000.00 and some Supervisors of the Company drew the allowance amounting to RMB 3,000.00. III. Dismissing and engaging of Directors, Supervisors and Senior Executives of the Company in the report period In the report period, there was no change in Directors, Supervisors and Senior Executives of the Company. IV. In the report period, there were 11 employees and no retiree of the Company. The component of the employees of the Company as follows: Category Number Proportion (%) Finance 2 18.18 Administration 4 36.36 Other 5 45.46 Total 11 100 Among them, 2 persons with Masters Degree, 3 with Bachelor Degree, 3 persons with college diplomas and 3 others. 16 Section V. Corporate Governance I. Corporate governance In the report period, in compliance with the requirements of Company Law, Securities Law, Code of Corporate Governance for Listed Companies, the Company perfected the corporate governance, improved the management level of the Company, faith and transparency of the Company and regulated the operation of the Company continuously. Including: 1. The Company established and revised the rules as below: Interim Measures of Shares held by Directors, Supervisors and Senior Executives and its Changes, Rules on Information Disclosure (Revised in Dec. 2007), Articles of Association (Revised in Dec. 2007), Rules of Procedure of Shareholders’ General Meeting (Revised in Dec. 2007), Rules of Procedure of the Board of Directors (Revised in Dec. 2007), Rules on Independent Directors (Revised in Dec. 2007), Rules of Procedure of the Supervisory Committee (Revised in Dec. 2007), Besides, the public notices of all rules, the relevant resolutions from the Board of Directors and the Supervisory Committee were published in Securities Times, Ta Kung Pao and http://www.cninfo.com.cn on Dec. 27, 2007. 2. The Company carried out the special campaign of corporate governance actively and energetically, draft out the rectification plan against with the problems found in self-inspection and problem pointed in on-site inspection from Shenzhen Securities Bureau of CSRC, and carries out the rectification plan. 3. In accordance with the actual situation, the Company further strengthened the construction of management work of the investors’ relationship, set down the special telephone line and e-mail to collect and hear the suggestion and advice of the investors and the public, took the advantage of modern network medium to expand the interactive channel through the voting system on line of the shareholders’ general meeting and so on, provided the better platform to communicate between the Company and the investors. Explanation on the special campaign of corporate governance in 2007: The “Report of Self-inspection on Special Campaign to Strengthen the Corporate Governance of Listed Companies” was examined and approved by the 13th Meeting of the 5th Board of Directors held on Sep. 18, 2007 and was published in http://www.cninfo.com.cn on Sep. 19, 2007. Subsequently, On Oct. 16, 2007, Shenzhen Securities Bureau of CSRC went forth the Supervision Opinions on Corporate Governance of Guangdong Sunrise Holdings Co., Ltd. (Shenzhen Securities Bureau GSZi [2007] Document No.117) to the Company after making the special inspection to the Company on Oct. 11, 2007, which draw much attention from the Board of Director, Independent Directors, the Supervisory Committee and Senior Executives. In accordance with the problems on corporate governance except the ones pressed for solution which were discovered in report of self-inspection, the Company set down the feasible rectification plan. The Board of Directors of the Company held the 16th Meeting of the 5th Board of Directors, at which the Rectification Report of Special Inspection on Corporate Governance of Listed Companies from Shenzhen Securities Bureau was examined and approved; the Independent Directors and the Supervisory Committee expressed the appraisal opinions in line with the relevant requirements. The Company published 17 the above said rectification report, public notices of the Board meeting and appraisal opinions from the Independent Director and the Supervisory Committee in Securities Times, Hong Kong Ta Kung Pao on Oct. 30, 2007. II. Performance of the Independent Directors In the report period, all of the 3 Independent Directors performed their duties faithfully and presented the Board meeting and shareholders’ general meeting as required by the relevant regulations. They also expressed their opinions from their professional view on the decision-making, associated transaction, share merger reform of the Company in accordance with the relevant laws, regulations and the Article of Association. They paid close attention on the operation of the Company against relative laws, promoted the improving of decision-making procedures towards scientific and standard in viewing of protecting the legal interests of the entire shareholders. 1. Independent Directors’ attendance in the Board meetings Attended Times of Board Attended Name of Independent meetings Absented meetings to meetings by Notes Directors personally (Times) present proxy (Times) (Times) Ma Hong 7 6 1 0 Including board meetings by Guo Shiping 7 7 0 0 means of communication Ban Wu 7 7 0 0 voting 2. Objection upon relative events raised by the independent directors In the report period, none of the Independent Directors proposed any objection upon any proposals of the board meeting or any related matters. III. Non-normative situation existed in corporate governance of the Company On Oct. 16, 2007, Shenzhen Securities Bureau of CSRC went forth the Supervision Opinions on Corporate Governance of Guangdong Sunrise Holdings Co., Ltd. (Shenzhen Securities Bureau GSZi [2007] Document No.117) to the Company after making the special inspection to the Company on Oct. 11, 2007, the non-normative situation pointed by Shenzhen Securities Bureau of CSRB were as follows: 1. The transparency of the Company and the submission of non-public information Situation of Object of The relationship Procedure Time of Type of information No. information between the Company of submission or Basis of information submission information disclosed submission and the objects submission its frequency publicly 18 Shenzhen Circular on Compiling Annual Not Ruifude Enterprise Production Management attributable Annual Group Co., Plan 2007 (with SR[2006] to production Ltd. Related relationship e-mail April Document No.21) Ruifude Group information operation Co., Ltd arranged the rules in place needed to be plan of the principal shareholder and disclosed actual controllers legally Shenzhen Not Circular on Compiling Annual Ruifude attributable Enterprise Production Management Group Co., Annual to Plan 2007 (with SR[2006] Ltd. Related relationship financial e-mail April information Document No.21) arranged the budget needed to be rules in place of the principal disclosed shareholder and actual controllers legally Shenzhen Not Ruifude attributable Group Co., Capital Represented the verbal notice on to Ltd. Related relationship balance per e-mail Every day paying expense with large amount information day in place of the Company needed to be disclosed legally 2. Content of part systems to be perfected Provisions stipulated in Article 18 of Rules for Procedure of the Shareholders’ General Meeting of the Company as “the shareholders or the Supervisory Committee who individually or jointly hold more than 5% of the total shares with voting rights shall have the right to propose a extraordinary resolution at the Shareholders’ General Meeting” did not accord with provisions stipulated in Article 103 of the Company Law concerning extraordinary right of proposing resolution. Provisions stipulated in Article 25 of Rules for Procedure of the Shareholders’ General Meeting of the Company as “during the period of no meeting, the Board of Directors, dismissed certified public accountants’ firm with legitimate reason, may engaged other certified public accountants’ firm temporarily, which would be reviewed an approved at the next Shareholders’ General Meeting” did not accord with provisions stipulated in Article 40 of Guideline of Rules for Listed Companies concerning the power of the engagement or dismissal of certified public accountants’ firm cannot be exercised by the Board of Directors authorized by the Shareholders’ General Meeting. 3. Procedure of the Board of Directors, Supervisory Committee and the Shareholders’ General Meeting to be standardized The Company didn’t explain obviously in announcement on the Shareholders’ General Meeting: All the shareholders have rights to attend the shareholders’ meeting and may appoint a proxy attending the meeting and voting in written, and the proxy of the shareholder need not be a shareholder of the Company, which didn’t accord with relevant provisions stipulated in Guideline of Rules for Listed Companies. The independent director of the Company didn’t give a repot on work at the Shareholders’ General Meeting 2006, which didn’t accord with Guideline of Rules for 19 Listed Companies. Minutes of the Shareholders’ General Meeting of the Company didn’t record the outline of each resolution, and Minutes of meeting of the Board of Directors didn’t record outline of directors, which didn’t accord with Guideline of Rules for Listed Companies. Therefore, the Board of Directors of the Company held the 16th meeting of the 5th Board of Directors, which reviewed and approved Rectification Report on Special Campaign to inspect the Corporate Governance of Listed Companies promulgating by China Securities Regulatory Commission Shanghai Office, the Independent Director and the Supervisor Committee issued evaluation opinion in accordance with requirements of China Securities Regulatory Commission. The above Rectification Report, public notices on resolution of the Board of Directors, Evaluation opinion from the Independent Directors and the Supervisory Committee were published in Securities Times, Hong Kong Ta Kung Pao and www.cninfo.com.cn dated 30 Oct. 2007. Details of rectification were as follows: 1. The operation of the Company was very hard in recent years. Since Sep. 2005 main operations lost, the daily expenditure of the Company maintained by rent of property. The Company is independent in business, personnel, assets, organization and financing, however, the Company depended the controlling shareholder in a certain extent, and need support of fund and restructuring from the controlling shareholder. Required to pay for large expenses of audit, information disclosure, and financial consultants of reorganization, the controlling shareholder focused on cash balance of the Company and required us to report cash amount everyday, supply undisclosed information as annual production and operation plan, financial budget etc, which caused non-standardization in corporate governance of the Company. The Board of Directors, the Supervisory Committee and Senior Executives actively communicated with controlling shareholder, actual controller on the aforesaid problem. The Company rectificated the former non-standardized corporate governance, such as supplying undisclosed information to controlling shareholder and actual controller etc, and reported and submitted relevant list of informed persons strictly in accordance with requirements stipulated in Circular on Strengthening Supervision of Supplying Undisclosed Information to controlling shareholder and actual controller of Listed Companies issued by CSRC with document SZJGSZ [2007] No. 11. The Company stoutly avoided other non-standardized corporate governance, and strictly executed provisions stipulated in Circular on Strengthening Supervision of Supplying Undisclosed Information to controlling shareholder and actual controller of Listed Companies with document SZJGSZ [2007] No. 11 and Supplementary Circular on Strengthening Supervision of Non-standardized Corporate Governance such as Supplying Undisclosed Information to controlling shareholder and actual controller of Listed Companies with document SZJGSZ [2007] No. 49. The Company didn’t supply undisclosed information to controlling shareholder and actual controller since 1 Nov. 2007. 2. The Board of Directors held the 17th meeting of the 5th Board of Directors and the 7th meeting of the Supervisory Committee on 26 Dec. 2006, reviewed and approved the following systems: Provisional Measures on Share Holding and Transfer by Directors, Supervisors and Senior Executives, Information Disclosure System (revised in Dec. 2007), Articles of Association of the Company (revised in Dec. 2007), Rules for Procedure of the Shareholders’ General Meeting (revised in Dec. 2007), Rules for Procedure of the Board of Directors (revised in Dec. 2007),Rules for Independent Directors (revised in Dec. 2007) and Rules for the Supervisory Committee (revised in Dec. 2007), and relevant public notices of relevant resolutions of the Board of Directors, 20 resolutions of the Supervisory Committee and the above rules were published in Securities Times, Hong Kong Ta Kung Pao and www.cninfo.com.cn dated 27 Dec. 2007. 3. The meeting of the Board of Directors, the Supervisory Committee and the Shareholders’ General Meeting standardize operated strictly in accordance with relevant laws and regulations and relevant rules for the Board of Directors, the Supervisory Committee and the Shareholders’ General Meeting of the Company after the 16th meeting of the 5th Board of Directors held on 29 Oct. 2007. IV Self evolution on implementation of the internal control system of the Company Owing to the loss of the main operations, the production of the Company stayed lojam in recent years. The Company established and revised various internal control systems in the previous years, but quite parts of system lost the foundation of implementation and evaluation. In the report period, in accordance with the actual situation, the Company continuously revised the internal control system, and examined implementation of the internal control system combined with the Special Campaign on Corporate Governance of the Listed Companies. The Board of Directors held the 17th meeting of the 5th Board of Directors and the 7th meeting of the Supervisory Committee on 26 Dec. 2006, reviewed and approved the following systems: Provisional Measures on Share Holding and Transfer by Directors, Supervisors and Senior Executives, Information Disclosure System (revised in Dec. 2007), Articles of Association of the Company (revised in Dec. 2007), Rules for Procedure of the Shareholders’ General Meeting (revised in Dec. 2007), Rules for Procedure of the Board of Directors (revised in Dec. 2007), Rules for Independent Directors (revised in Dec. 2007) and Rules for the Supervisory Committee (revised in Dec. 2007). The Company continuously improved and perfected internal control system, and executed the information disclosure in accordance with provisions stipulated in laws and regulations such as the Company Law, Securities Law and Rules for Listing Share in Shenzhen Stock Exchange. V Excitation mechanism of Senior Executives In the report period, the Company stayed lojam, and there was no excitation mechanism of senior executives of the Company. 21 Section VI The Shareholders’ General Meeting In the report period, the Company held the shareholders’ general meeting once. The following were the details. 1. On 15 Jan. 2007, the Company held the Shareholders’ Meeting on Share Merger Reform, and the public notices concerning the resolutions of the meeting on Share Merger Reform were published in Securities Times dated May 11, 2006 and www.cninfo.com.cn. 2. On 29 Mar. 2007, the Company held the Shareholders’ General Meeting 2006, and the public notices concerning the resolutions of the meeting were published in Securities Times, Hong Kong Ta Kung Pao dated 30 May 2007 and www.cninfo.com.cn. 22 Section VII. Report of the Board of Directors I. Discussion and analyses on the overall operation in the report period During the report period, the Company has no main operations. In 2007, the short-term loan of the Company reached RMB 468 million, financial expenses of the Company in the report period reached RMB 22,675,168.75, and the administrative expenses of the Company amounted RMB 3,555,210.04, which cause the loss of the Company, and net profit amounted RMB -22,075,217.13. But the operation result of the Company actualized profit in 2006, because the Company cleaned up non-recurring funds of the Company for RMB 57,364,800 occupied by associated parties in the 3rd quarter 2006, the Company switched reserve for uncollectible accounts for RMB 34,537,200, which helped the Company’s operating achievement realize profit in the last year. During the report period, the Company actively drove share merger reform. Resolution on Share Merger Reform was approved in the Shareholders’ Meeting of the Company through voting on 15 Jan. 2007. Owing to the 191,400,000 shares of the Company held by Shenzhen Lionda Holdings Co., Ltd, controlling shareholder of the Company, was judicial froze, the Company cannot applied to implement resolution on share merger reform to China Securities Depository and Clearing Corporation Limited temporarily. During the report period, the Company would continue to actively communicate and negotiate with the creditors and endeavor to make some breakthroughs in the aspect of debts reorganization. The Company would actively search for a cooperation partner of real strength, good faith and operation capability. The Company signed Agreement to Engage as Financial Consultants with Beijing Integrity Management Consulting Co., Ltd in Jan. 2007, so as to make a breakthrough on recombination, and improve the capacity of continuous operation of the Company. Nevertheless, the Company spent hard efforts in the debts reorganization and assets reorganization, and also activity search the best share merger reform mode, however, the creditors and credit amounts were scattered and the Company had great guarantee risks. Therefore little progress had been made in the debts reorganization work of the Company in the report period. Meanwhile, the controlling shareholder of the Company contacted with some restructuring partners of good faith and real strength, however, there were no oral or written agreement reached and little progress had been made in the assets reorganization work of the Company. II. Operation of the Company in the report period In the report period, the Company lost main business so there was no main business income or main business profit. The Company maintained daily operation by debt paying and assets tapping III. Assets Structure of the Company in the report period 2007 2006 Item Proportion in Proportion in Change range Amount Amount total assets total assets 23 Total assets 27,154,777.79 29,826,570.27 -8.96％ Notes receivable 0 0 Inventories 2,000,000.00 7.37％ 2,000,000.00 6.70％ No changes Long-term stock 12,543,375.02 46.19％ 15,311,261.02 51.33％ -18.08％ investment Net fixed assets 8,286,902.49 30.52％ 8,865,524.91 29.64％ -6.53％ Construction in 0 0 progress Short-term loan 467,553,910.86 1721.81％ 512,333,288.46 1717.71％ -8.74％ Long-term loan 0 0 Reasons for changes: total assets decreased mainly because long-term stock investment decreased compared with that of the last year. Long-term stock investment decreased due to disposal of long-term stock investment. Short-term loan decreased mainly because Shenzhen Shenbao Industrial Co., Ltd refund the loan due to joint liability caused by guarantee foe the loan of the Company at the end of the period. IV. Changes of major expenses in the report period Item 2007 2006 Change range Operating expense 0 0 Administrative expenses 3,555,210.04 3,309,973.21 7.41％ Financial expenses 22,675,168.57 21,533,570.48 5.30％ Income tax 0 0 Reasons for changes: there were no operating expenses in this period because there was no main business. In this period, the administrative expenses had no great changes, and the financial expenses increased in this period because the bank increased the interest. V. Changes of cash flows in the report period Item 2007 2006 Change range Net cash flow arising from operating activities -3,178,361.53 -84,197.08 -3674.91％ Net cash flow arising from investing activities 3,104,000.00 74,750.00 4052.51％ Net cash flow arising from financing activities 0 0 Reasons for changes: cash flows changed mainly because the cash payment of other activities related to operation increased compared with the last year. VI. Investment of the Company The Company had not raised any proceeds in the report period, nor had it used any proceeds raised before the report period. The Company had no important projects invested with non-raised 24 proceeds or other uses of the non-raised proceeds. The Company had no investment programs in the report period. VII. Routine work of the Board of Directors (I) In the report period, the Company had held 7 Board meetings, with details as follows: 1. On 17 Apr. 2007, the Company held the 11th meeting of the 5th Board of Directors, reviewed and approved Report of the Board of Directors 2006 and Annual Report 2007, and public notices on resolution of the meeting were published in Securities Times, Hong Kong Ta Kung Pao and www.cninfo.com.cn dated 28 Apr. 2007. 2. On 26 Apr. 2007, the Company held the 12th meeting of the 5th Board of Directors, reviewed and approved the 1st Quarterly Report of 2007 and the 1st Quarterly Financial Report of 2007, and relevant public notices were published in Securities Times, Hong Kong Ta Kung Pao and www.cninfo.com.cn dated 28 Apr. 2007. 3. On 5 Jul. 2007, the Company held the 14th meeting of the 5th Board of Directors, reviewed and approved Resolution on the Information Disclosure System of the Company, and public notices on resolution of the meeting were published in Securities Times, Hong Kong Ta Kung Pao and www.cninfo.com.cn dated 9 Jul. 2007. 4. On 9 Aug. 2007, the Company held the 15th meeting of the 5th Board of Directors, reviewed and approved Interim Report 2007 and its summary, and public notices on resolution of the meeting were published in Securities Times, Hong Kong Ta Kung Pao and www.cninfo.com.cn dated 13 Aug. 2007. 5. On 18 Sep. 2007, the Company held the 13th meeting of the 5th Board of Directors, reviewed and approved Self-chek Report on the Special Campaign to Strengthen the Corporate Governance of Listed Companies, and public notices on resolution of the meeting were published in Securities Times, Hong Kong Ta Kung Pao and www.cninfo.com.cn dated 19 Sep. 2007. 6. On 29 Oct. 2007, the Company held the 16th meeting of the 5th Board of Directors, reviewed and approved the 1st Quarterly Report of 2007, the 1st Quarterly Financial Report of 2007 and Rectification Report on Special Campaign to inspect the Corporate Governance of Listed Companies promulgating by China Securities Regulatory Commission Shanghai Office, and relevant public notices were published in Securities Times, Hong Kong Ta Kung Pao and www.cninfo.com.cn dated 28 Apr. 2007. 7. On 26 Dec. 2007, the Company held the 17th meeting of the 5th Board of Directors, reviewed and approved Provisional Measures on Share Holding and Transfer by Directors, Supervisors and Senior Executives, Information Disclosure System (revised in Dec. 2007), Articles of Association of the Company (revised in Dec. 2007), Rules for Procedure of the Shareholders’ General Meeting (revised in Dec. 2007), Rules for Procedure of the Board of Directors (revised in Dec. 2007)and Rules for Independent Directors (revised in Dec. 2007), and relevant public notices were published in Securities Times, Hong Kong Ta Kung Pao and www.cninfo.com.cn dated 27 Dec. 2007. 25 (II) Implementation of the resolutions made at the Shareholders’ General Meeting In the report period, the Board of the Company had strictly executed their duties in accordance with the requirements stipulated in relevant laws and regulations including the Company Law, Securities Law and the Articles of Association, etc, and, according to the resolutions and authorization of the Shareholders’ General Meeting, had accomplished the various work stipulated in the resolutions made at the Shareholders’ General Meeting. On 15 Jan. 2007, the Company held the Shareholders’ Meeting on Share Merger Reform. Owing to the 191,400,000 shares of the Company held by Shenzhen Lionda Holdings Co., Ltd, controlling shareholder of the Company, was judicial froze, the Company cannot applied to implement resolution on share merger reform to China Securities Depository and Clearing Corporation Limited temporarily. On 19 May 2007, the Company held the Shareholders’ General Meeting 2006, reviewed and approved Profit Distribution Plan 2006; in 2006, the Company didn’t distribute any profit, nor did it transfer any capital reserves into share capital. (III) The Board of Directors formulated Measures for Independent Directors on Work of Annual Report, including report system and communication system. The executives of the Company reported overall status of operation of the Company in current year to each independent director and arranged each independent director to on-the-spot investigation. Person in charge of finance of the Company submitted arrangement of audit in current year and other relevant information to each independent director before audit of certified public accountants, and arranged meeting of independent directors and certified public accountants to discuss the problems in process of audit. (IV) There was no special audit committee of the Board of Directors of the Company, but the Board of Directors arranged Audit Department of the Company to check and approve the various financial reports to be audited and audited annual financial report. As for the Financial Report of 2007, the Audit Department fully communicated with on-the-spot auditor and person in charge of audit of Shenzhen Dahua Tiancheng Certified Public Accountants, actively examined and verified Financial Report of 2007 issued by Shenzhen Dahua Tiancheng Certified Public Accountants, submitted the Financial Report of 2007 after audit to the 28th Meeting of the 5th Board of Directors for approval on 11 Apr. 2008, and advised to engage Shenzhen Dahua Tiancheng Certified Public Accountants as the annual auditor of the Company in 2008. This resolution needed to be submitted to the Shareholders’ General Meeting 2007 for approval. VIII. Profit distribution preplan As audited by Shenzhen Dahua Tiancheng Certified Public Accountants, the net profit realized by the Company in 2007 totaled RMB -22,075,217.13 and the retained profit totaled RMB -2,446,177,404.19. The Company did not distribute any profit, nor did it transfer any capital reserves into share capital in 2007. This resolution would be submitted to the Shareholders’ General Meeting for examination. IX. Explanation by the Board of the Company on the Auditors’ Report with disclaimer of opinion 26 expressed by the Certified Public Accountants The Board explained the Auditors’ Report with disclaimer of opinion expressed by Shenzhen Dahua Tiancheng Certified Public Accountants SH (2008) GSZ009 as follows: (I) The content and reason analysis of the Auditor’s Report with disclaimer of opinion Shenzhen Dahua Tiancheng Certified Public Accountants believed that, as indicated by Notes 7, 9 and 12 to the Accounting Statements, the repayment pressure of short-term liabilities of the Company is huge. And there are lots of guarantee liabilities being sued, which would directly influence the operation continuity of the Company if they could not be eliminated in the short run. Financing and debt restructuring are being carried out by the Company, and the management team believes that future operation needs could be handled after the financing and debt restructuring. Therefore, the financial statements 2007 were prepared according to the standards of continuous operation, and not included were the adjustments that would be made in case of failing to get the capital needed. But the improving measures of continuous operation of the Company were still at the initial stages, we could not get full and proper audit evidence to prove whether it could improve continuous operation ability of the Company efficiently. So we could not judge whether drawing financial statement 2007 in accordance with continuous operating hypothesis was proper. As the possible influences of foresaid issue were important and comprehensive, Shenzhen Dahua Tiancheng Certified Public Accountants unable to express opinions on the financial statement of the Company. (II) Explanation on this issue by the Board of Directors: The Board of the Company believed that, even though the Company confronted with great short-term repayment pressure and lots of guarantee lawsuits, the Company had made some progress in debt paying and assets tapping, and that it could get the operation capital needed to maintain the normal production and operation. The Company actively continued to communicate and negotiate with the creditors and endeavored to make some breakthroughs in the aspect of debt restructuring. The Company signed Agreement to Engage as Financial Consultants with Beijing Integrity Management Consulting Co., Ltd in Jan. 2007. The controlling shareholder of the Company contacted with some restructuring partners of good faith and real strength, although there were no oral or written agreement reached, the Company actively enhanced debt restructuring and assets restructuring work of the Company at all time, so as to make a breakthrough on recombination, and improve the capacity of continuous operation of the Company. X Other events for report (I) Capital occupations and development of clearing capital In the report period, the Company did not supply fund for controlling shareholders and its subsidiary companies. The credits and liabilities between the Company and related parties were problems left by transactions in previous years, while the capital occupations by related parties were mainly caused by loans, guarantee or payment on behalf, etc. Capital of the Company occupied by the controlling shareholder and its subsidiary companied had been cleared up in the 3rd quarter of 2006. (II) Special explanations and independent opinions given by the independent directors on the accumulated external guarantees and the external guarantees of the period of the Company 27 According to the regulations of the Notice on the Problems of the Standardization of the Capital Current between Listed Companies and Related Parties as Well as the External Guarantees of Listed Companies (ZJF [2003] No. 56, hereinafter referred to as the Notice) issued by CSRC and the Articles of Association of the Company, we, as independent directors of the Company and taking a careful and responsible attitude, have conducted necessary inspection into the external guarantees of the Company, and hereby express our independent opinions as follows: By Dec. 31, 2007, the Company had provided no guarantees for the controlling shareholder or its subsidiary companies s as the cases described in the Notice of the CSRC. The Company had provided guarantees for the controlling shareholder and its subsidiary companies before, but those were historically left issues. And since most of the guaranteed parties had no repayment power, the Company had done the predicted liability arrangements for most of the guarantees in previous years. (III) The newspapers for information disclosure designated by the Company were the Securities Times and Hong Kong Ta Kung Pao in the report period. Section VIII Report of the Supervisory Committee I. Work of the Supervisory Committee in the report period In the report period, the Supervisory Committee held 3 meetings, with details as follows: 1. On Apr. 17, 2007, the 5th meeting of the 5th Supervisory Committee of the Company was held, at which such events were examined and approved as Report of the Supervisory Committee of the Company in 2006 and Report and Abstract in 2006. And the public notices about the resolutions of this meeting were published in Securities Times, Ta Kung Pao and http://cninfo.com.cn on Apr. 28, 2007. 2. On Aug. 9, 2007, the 6th meeting of the 5th Supervisory Committee of the Company was held, at which the Text and Abstract of the Semi-annual Report in 2007 was examined and approved. And the public notices about the resolutions of this meeting were published in Securities Times, Ta Kung Pao and http://cninfo.com.cn on Aug. 13, 2007. 3. On Dec. 26, 2007, the 7th meeting of the 5th Supervisory Committee of the Company was held, at which the following proposals were examined and approved: Interim Measure for the Share of the Company Held by the Directors, the Supervisors and the Senior Management Staffs and Its Change, Information Disclosure System (amended in Dec., 2007), The Article of Association of the Company (amended in Dec., 2007), Rules and Procedures of the Shareholders’ General Meeting (amended in Dec., 2007), Rules and Procedures of the Supervisory Committee (amended in Dec., 2007). And the public notices about the resolutions of this meeting were published in Securities Times, Ta Kung Pao and http://cninfo.com.cn on Dec. 27, 2007. 28 II. Independent opinions of the Supervisory Committee on relevant issues of the Company in 2007. In the report period, the Supervisory Committee had conducted effective supervision over the finance of the Company, directors, managers and senior executives strictly in accordance with the regulations and requirements of the Company Law, Securities Law, Listing Rules and the Articles of Association, by concerning to the operation of the Company, and had expressed its independent opinions on the following issues: 1. Operation of the Company by laws The Company could timely establish and amend the related internal control system according to the actual situation. The decision-making procedures of the operation of the Company had been legal; while executing their duties, the directors and managers had no behavior that had gone against the laws, regulations, or the Articles of Association, or done harm to the interests of the Company or the interests of the shareholders. However, the Company still existed some nonstandard position in the corporate governance, such as offering unpublicized information to the large shareholders and actual controller and disclosing information of the actual controller. The Supervisory Committee issued opinion on the Rectification Report on Shenzhen CSRC Conducted Special Inspection for Corporate Governance of the Listed Company according to the requirement of the supervisory opinion. 2. Financial inspection The Supervisory Committee had conducted strict and careful inspection into the financial system and financial status of the Company, and it believed that the Financial Report 2007 prepared by the Company had truly reflected the financial status and operation achievements of the Company, and that the comments made by Shenzhen Dahua Tiancheng Certified Public Accountants had been fair and objective. 3. In the report period, the Company had no purchases or sales of assets, nor did it have any inside dealings or any cases that had done harm to the interests of part of the shareholders or had led to the loss of the Company’s assets. 4. In the report period, the Company had no raised proceeds. 5. In the report period, the Company had no related transactions. 6. Implementation of the resolutions of the Shareholders’ General Meeting by the Board Members of the Supervisory Committee had attended the Board meetings and the Shareholders’ General Meeting, and it also had conducted supervision over the implementation of the resolutions of the Shareholders’ General Meeting. It believed that the Board had strictly executed the various resolutions made at the Shareholders’ General Meeting. III. Opinions of the Supervisory Committee on the explanation given by the Board of the Company on the Auditors’ Report without any opinions expressed by the Certified Public Accountants 29 Shenzhen Dahua Tiancheng Certified Public Accountants had furnished an Auditors’ Report but had been unable to express any opinions for the year 2007, and the Board of the Company had given special explanations on those issues mentioned in this Report. The Supervisory Committee believed that the Auditors’ Report furnished by Shenzhen Dahua Tiancheng Certified Public Accountants had truly reflected the financial status and operation achievements of the Company, and that the explanations given by the Board on the issues mentioned in the Auditors’ Report had fit the actual conditions of the Company. The Supervisory Committee would actively cooperate with the Board in various works, urge the Board to strengthen the debt restructuring work and seek for a restructuring partner of real operation strength positively, so as to try to improve the continuous operation capacity of the Company. Section IX Significant Events I. Significant lawsuits and arbitration cases in the report period 1. As for the dissension case on credit line contract between China Great Wall Asset Management Corp. Shenzhen Office and the Company with contract principal fund of RMB 21 million, Guangdong Haifeng People’s Court accepted the appointment by Guangdong Higher People’s Court to file a case and execute the aforesaid dissension case. Application executor --- China Great Wall Asset Management Corp. Shenzhen Office transferred its creditor’s rights to Huizhou Daya Bay Zhuopeng Industrial Co., Ltd. by auction on Oct. 18, 2006, and the auction fund was paid off on Oct. 31, 2006. Executor --- China Great Wall Asset Management Corp. Shenzhen Office applied for Haifeng People’s Court, Guangdong to change application executor into Huizhou Daya Bay Zhuopeng Industry Co., Ltd. on Jan.18, 2007. Jan. 26, 2007, Guangdong Haifeng People’s Court ruled the following civil judgment: change Huizhou Daya Bay Zhuopeng Industry Co., Ltd. into the executor of this case; right and obligation of China Great Wall Asset Management Corp. Shenzhen Office, the former executor, were succeeded by Huizhou Daya Bay Zhuopeng Industry Co., Ltd. In course of execution, the party subject to enforcement was investigated that it has held equities of 5 companies, and Guangdong Haifeng People’s Court, ruled the following civil judgment on Jun. 8, 2007: Frozen 80% equity of Shenzhen Lionda Light & Textile and Chemical Industry Co., Ltd., 95% equity of Shenzhen Lionda Electric Industry Co., Ltd., 95% equity of Shenzhen Lionda Development Co., Ltd., Shenzhen Lionda Material Import and Export Co., Ltd. and 70% equity of Shenzhen Lionda Time Industry Co., Ltd. held by the company subject to enforcement. The Company withdrawn fully projected liabilities of this lawsuit event, and it brought no effect on current profits and losses. Please refer to sue event public notice 2007-039 with details of the above lawsuit published in Securities Times and Hong Kong Ta Kung Pao on Jul. 31, 2007 by the Company. 2. As for the dissension case on loan contract between the Company and Bank of China Shenzhen Branch (China Cinda Asset Management Corporation Shenzhen Office)., principal fund of this contract was HKD 32 million, and Shenzhen Shenbao Industrial Co., Ltd. shouldered joint liabilities for this loan. In December 2005, China Cinda Asset Management Corporation Shenzhen Office transferred the aforesaid creditor’s right to Glenmore Investment Limited. Shenzhen Intermediate People’s Court frozen deposit RMB 9,000,000 of Glenmore Investment Limited in 30 China Construction Bank, Shenzhen Branch, Jingyuan Sub-branch, as well as sealing up and freezing assets of Shenzhen Shenbao Industry Co., Ltd. counted by RMB 9,000,000. Owing to becoming reconciled between accuser of Glenmore Investment Limited and appellee Shenzhen Shenbao Industrial Co., Ltd., Shenzhen Shenbao Industrial Co., Ltd paid RMB 29,000,000 for Glenmore Investment Limited. Shenzhen Intermediate People’s Court ruled the following civil judgments in accordance with laws on Jan. 10, 2007: permit Glenmore Investment Limited to repeal the lawsuit for Shenzhen Shenbao Co., Ltd; unseal guarantee asset of Glenmore Investment Limited; unseal the property of Shenzhen Shenbao Co., Ltd. As for the above issues, the Company received the Civil Judgment made from Shenzhen Intermediate People’s Court on Jul, 19, 2007 with the following judgment: 1. the Company, the appellee, should pay principal fund of HKD 3,566,248 and the corresponding interest for the accuser Glenmore Investment Limited; 2. the acceptance fee and security fee of RMB 387,968 for the case should be undertaken by the Company. Meanwhile, according to the notice of respondence to action received by the Company from Shenzhen Intermediate People’s Court in Jun., 2007, Shenzhen Shenbao Industrial Co., Ltd brought civil lawsuits to Shenzhen Intermediate People’s Court because RMB 29,000,000 to be paid substituting for the Company with request as follows: 1. the Company, the appellee, should pay RMB 29,000,000 and the corresponding interest for the accuser, Shenzhen Shenbao Industrial Co., Ltd; 2. the Company should undertake the legal fee. Shenzhen Intermediate People’s Court decided to hear the case on Jun. 20, 2007. The Company would fulfill the obligations continuously disclosed based on the progress of lawsuit. This lawsuit involved the changes of creditors and brought no effect on current profits and losses. Please refer to sue event public notice 2007-039 and sue event public notice 2007-069 with details of the above lawsuit respectively published in Securities Times and Hong Kong Ta Kung Pao on Jul. 31, 2007 and Dec. 27, 2007 by the Company. 3. As for the dissension case on loan contract between the Company and China Everbright Bank Shenzhen Branch., principal fund of this contract was RMB 15 million. The Company received civil judgment of abeyant execution from Shenzhen Intermediate People’s Court on Sep. 5, 2002. China Everbright Bank Shenzhen Branch, the executor, applied for Shenzhen Intermediate People’s Court to compellingly execute on June 16, 2005. In course of execution, Shenzhen Intermediate People’s Court frozen and evaluated 20% equity of the Company in Shenzhen Machine Joint Venture Co., Ltd., and it held public auction. It was failed to deal for no one purchasing after 3 times auctions. Now, executors required to cancel out part of liabilities with base price of RMB 1,290,000 of the third auction. Shenzhen Intermediate People’s Court ruled the following civil judgments: cancel out liabilities of China Everbright Bank Shenzhen Branch with RMB 1,290,000 of 20% equity of Shenzhen Jianda Joint Venture Co., Ltd. held by the company subject to enforcement; release 20% equity of Shenzhen Jianda Joint Venture Co., Ltd. held by the company subject to enforcement from frozen. The Company withdrawn projected liabilities of this guarantee, so long-term equity investment disposal of this item would help projected liabilities decrease by RMB 1.29 million, non-business income increase by RMB 1.29 million. Meanwhile, it would bring investment losses around RMB 1.44 million. Furthermore, Shenzhen Intermediate People’s Court legally issued the Notice to Seal up on Nov. 9, 2006 according to the application of China Everbright Bank Shenzhen Branch, with the following details: the workshops of the Company respectively located at F3 and F4 of Huanlianfa Complex Building, Huaqiangbei Road 31 and No. 91, Xuegangnan Road, Xuexiang Community, Buji Street, Longgang District were sealed up in turn on Oct. 24, 2006. The Company had made bad debt provision on schedule for the said lawsuit, which did not bring any influence on the current profits and losses. Please refer to sue event public notice 2007-039 with details of the above lawsuit published in Securities Times and Hong Kong Ta Kung Pao on Jul. 31, 2007 by the Company. 4. As for the dissension case on loan contract between the Company and Bank of Communication Shenzhen Branch Overseas Chinese Town Sub-branch (China Cinda Asset Management Corporation) and Shenzhen Jinbeisheng Investment Co., Ltd., principal fund of this contract was RMB 2.6 million, and the Company bore joint liabilities. China Cinda Asset Management Corporation Shenzhen Branch transferred creditor’s right and interest under this case to Crosstown China Investment III, LLC on Dec. 27, 2005. Public notice on creditor’s right transferring was published in Nanfang Daily on July 12, 2006. Therefore, Grosstown China Investment III, LLC submitted written application to Guangdong Shanwei Intermediate Peoples’ Court and asked that change itself into executor of this case. Guangdong Shanwei Intermediate Peoples’ Court ruled the following civil judgment: Change executor of this case into Crosstown China Investment III, LLC. The Company withdrawn fully projected liabilities of this lawsuit event, and it brought no effect on current profits and losses. Please refer to sue event public notice 2007-039 with details of the above lawsuit published in Securities Times and Hong Kong Ta Kung Pao on Jul. 31, 2007 by the Company. 5. As for the three dissension cases on loan contract among the Company and Shenzhen Guoyin Investment Group Co., Ltd and Bank of Communication Shenzhen Branch Nanshan Sub-branch, principal funds of the contracts were respectively RMB 2 million, RMB 3 million and RMB 6 million, totaling to RMB 11 million, which were guaranteed by the Company. Shenzhen Intermediate People’s Court respectively made civil judgment (SZFJTC Zi [2000] No. 213, 214, 215) for the three cases in Sep., Oct., Nov., 2000, which were legal in effect. Hereinafter, application executor—Bank of Communication Shenzhen Branch Nanshan Sub-branch transferred the relevant creditor’s rights to ADDVALUE HOLDING LIMITED, because Shenzhen Guoyin Investment Group Co., Ltd and the Company didn’t perform the obligation confirmed in the judgment, ADDVALUE HOLDING LIMITED applied for Shenzhen Intermediate People’s Court to compellingly execute, and Shenzhen Intermediate People’ Court accepted the case legally. On Jun. 11, 2007, Guangdong Higher People’s Court made Written Decision for Execution designated in [2007] YGZZ Zi No. 377, appointing the case executed by Guangdong Heyuan Intermediate People’s Court which would file and execute the case on Jul. 18, 2007. During the course of execution, the applicant required Guangdong Heyuan Intermediate People’s Court to legally auction the equity of S*ST Sunrise with 2,640,000 shares (Securities code: 000030, with nature of shares: domestic legal person share) held by Shenzhen Guoyin Investment Group Co., Ltd. In the opinion of Guangdong Heyuan Intermediate Court, the requirement of the applicant was in line with laws, so on Nov. 6, 2007, a civil judgments ([2007] HZFZ Zi No. 100, 101, 102) were made by laws: the equity of S*ST Sunrise with 2,640,000 shares (Securities code: 000030, with nature of shares: domestic legal person share) held by Shenzhen Guoyin Investment Group Co., Ltd should be auctioned. On Nov. 26, 2007, Guangdong Heyuan Intermediate People’s Court issued Notice to Auction Property. Given S*ST Sunrise (the Company) had entered the procedure of share merger 32 reform, and Shenzhen Guoyin Investment Co., Ltd was one of the non-tradable shareholders of the Company, according to the requirement mentioned in the plan of share merger reform, the consideration of 254,810 shares paid for tradable shareholders by the non-tradable shareholder Shenzhen Guoyin Investment Group Co., Ltd, should be paid by the large shareholder Shenzhen Lionda Group Co., Ltd. Therefore, the Company submitted the Letter on Reserving Shares for Paying Consideration Owing to Share Reform by Auctioning Equity of Sunrise Company Held by Guoyin Investment to Guangdong Heyuan Intermediate People’s Court on Nov. 28, 2007, requesting Guangdong Heyuan Intermediate People’s Court to reduce 254,810 shares for payment of the consideration owing to share reform when entrusting to auction according equity. The lawsuit temporarily had no affect on the current profits and losses because of the unknown result. Please refer to sue event public notice 2007-069 with details of the above lawsuit published in Securities Times and Hong Kong Ta Kung Pao on Dec. 27, 2007 by the Company. 6. As for the dissension case on loan contract between the Company and Shenzhen Development Bank Shenzhen Nantou Sub-branch, principal fund of this contract was HKD 4 million, Shenzhen Shenbao Industrial Co., Ltd offered guarantee for the loan. Shenzhen Shenbao Industrial Co., Ltd had paid off part of the principal fund owing to several urgencies, by Aug. 30, 2007, the Company still owed interest penalties of the loan with KHD 276,100.72, compounding interest of HKD 134,125.82. Given the unpaid result, Shenzhen Development Bank Shenzhen Nantou Sub-branch brought a lawsuit to Shenzhen Nanshan People’s Court on Aug. 31, 2007. Shenzhen Nanshan People’s Court heard the case on Nov. 12, 2007, and on Nov. 20, 2007 made civil judgment ([2007] SNFMEC Zi No. 1447): the Company should pay interest penalties of the loan with HKD 276,100.72 and compounded interest of HKD 134,125.82 for Shenzhen Development Bank Shenzhen Nantou Sub-branch, undertaking the acceptant fee of the case of RMB 3,614.5. The Company had withdrawn interest of the short-term borrowing as for the said lawsuit, which had no influence on the current profits and losses. Please refer to sue event public notice 2007-069 with details of the above lawsuit published in Securities Times and Hong Kong Ta Kung Pao on Dec. 27, 2007 by the Company. II. Purchase, sale and brief procedure introduction of merger in the report period In the report period, no capital purchase or sale took place or took place before but lasted to this period, neither did any merger events. III. In the report period, the Company did not conduct investment on securities, nor held the equity of other listed companies and the non-listed financial enterprises. IV. Significant related transactions in the report period: 1. The Company had no related transactions arising from merchandise purchasing or sale, nor relevant labor source offer or acceptation in the report period. 2. The Company had no related transactions arising from transfer of assets and equity in the report period. 3. The Company had no transactions arising from the overseas investments between the Company 33 and the related parties in the report period. 4. Creditor’s rights and debt obligation between the Company and related parties (including the subsidiaries not brought to the consolidated scope) existed in the report period: In the report period, the creditor’s rights and debt obligation between the Company and the related parties were as follows: Unit: (RMB)’ 0000 Funds provided to the listed companies Funds provided to related parties by related parties Related parties Occurred Occurred Balance Balance amount amount Shenzhen Lionda Food Industry Co., 0.00 499.87 0.00 0.00 Ltd Shenzhen Lionda Development -69.95 5,536.22 0.00 0.00 Co., Ltd Shenzhen Lionda Material Import & 0.00 2,793.53 0.00 0.00 Export Co., Ltd Shenzhen Keruite New Materials 0.00 21.40 0.00 0.00 Co., Ltd Shenzhen Sun Pipeline Co., Ltd 0.00 2,568.67 0.00 0.00 Shenzhen Jiadeng Trade Co., Ltd 0.00 100.85 0.00 0.00 Shenzhen Yingte Enterprise Co., 0.00 47.75 0.00 0.00 Ltd Shenzhen Fuguanghao Industrial 69.24 99.47 0.00 0.00 Co., Ltd. Shenzhen Lionda Group Co., Ltd. 0.00 0.00 -208.72 395.55 Shenzhen Lionda Leke Box Co., 0.00 0.00 0.00 101.96 Ltd Shenzhen Light Industry Import 0.00 0.00 0.00 415.00 & Export Company Shenxin Enterprise Co., Ltd. 0.00 0.00 0.00 37.26 Total -0.71 11,667.76 -208.72 949.77 Note: (1) The above creditor’s rights and debt obligation between the Company and related parties formed before became the issues left over by history. The main reason for the related parties to occupy capital was borrowings, guarantee loan or payment on behalf of others. (2) In the report period, the listed companies offered capital of RMB 0.00 to the controlling shareholders and the subsidiaries with balance of RMB 0.00. The capital of the Company occupied by the controlling shareholders and the subsidiary of the Company was discharged in the third quarter of 2006. 34 5. In the report period, the Company had no other significant related transactions. V. The significant contracts which the Company should disclose and the execution. 1. There is no trusteeship, lease or contracts of assets in other companies or trusteeship, lease or contracts of assets in listed company by other companies in reported period or any such cases occurring before but lasting up to this period. 2. Significant commitments In the report period, no guarantee events occurred. The following chart was the guarantees left over by history. Unit: (RMB)’ 0000 External guarantees of the Company (excluding guarantees for shareholding subsidiaries) Company guaranteed Date Amount Guarantee type Time lasting Finished or Guarantee (agreement not for related signing date) party or not Shenzhen Lionda May 30, 2000 850.00 Joint - No Yes May 30, 2000- Bonded Trading Co., Ltd responsibility May 30, 2001 guarantee Shenzhen Sun Pipeline Dec. 30, 1993 4,335.00 Joint - No Yes Dec. 30, 1993- Co., Ltd responsibility Dec. 30, 1998 guarantee Shenzhen Gaokeda Mar. 10, 1994 50.00 Joint - No Yes Mar.10, 1994 - Electronics Co., Ltd responsibility Mar. 10, 1995 guarantee Shenzhen Yuda Import Jul. 8, 1998 480.00 Joint - No Yes Jul. 8, 1998 - & Export Co., Ltd responsibility Jan. 25, 2000 guarantee Shenzhen China Bicycle Dec. 19, 1995 29,116.00 Joint - No No Dec. 19, 1995 - Company (Holdings) responsibility Nov. 25, 1998 Limited guarantee Yue-Shen Light Industry Dec. 30, 1993 818.78 Joint - No Yes Dec. 30, 1993 - & Trading Company responsibility Jun. 22, 1996 guarantee Guangzhou Xufeng May 2, 1995 1,500.00 Joint - No No May 2, 1995 - Enterprise Group Co., responsibility May 2, 1996 Ltd guarantee Shenzhen Jinbeisheng Jun. 22, 1995 7,760.00 Joint - No No Jun. 22, 1995 - Investment Co., Ltd responsibility Jun. 22, 1996 guarantee Shenzhen Guoyin Dec.13, 1995 4,030.00 Joint - No Yes Dec.13, 1995 - Investment Group Co., responsibility Jan. 28, 2001 Ltd guarantee 35 Shenzhen Paina Garment Apr. 30, 1998 130.00 Joint - No No Apr. 30, 1998 - Co., Ltd responsibility Jan. 30, 1999 guarantee Shenzhen Gintian Jun. 30, 1997 2,675.00 Joint - No No Jun. 30, 1997 - Industrial Group Co., Ltd responsibility Dec. 31, 1999 guarantee Shenzhen Zhongwu Apr. 30, 1997 1,679.00 Joint - No No Apr. 30, 1997 - Resources Import & responsibility Apr. 30,1999 Export Co., Ltd guarantee Shenzhen Guangyingda Sep. 25, 1995 7,897.01 Joint - No Yes Sep. 25, 1995 - Industrial Development responsibility Jan. 31, 1999 Corporation guarantee Shenzhen Ligang Aug. 15, 1996 723.38 Joint - No No Aug. 15, 1996 - Industrial Company responsibility Aug. 15, 1997 guarantee Shenzhen Maoyuan Jan. 30, 1995 856.00 Joint - No No Jan. 30, 1995 - Investment Development responsibility Jan. 30, 1996 Co., Ltd guarantee Shenzhen Xingda May 1, 1996 40.00 Joint - No No May 1, 1996 - Industry & Trade Co., responsibility May 1, 1998 Ltd guarantee Shenzhen Huasu Co., Ltd Mar. 5, 1997 1,371.00 Joint - No No Mar. 5, 1997- responsibility Mar. 5, 1998 guarantee Shenzhen Jinhai Apr. 7, 1996 350.00 Joint - No No Apr. 7, 1996 - Electronics Co., Ltd responsibility Apr. 7, 1997 guarantee Shenzhen Guanghualin May 23, 1996 1,220.00 Joint - No No May 23, 1996 - Investment Co., Ltd responsibility May 23, 1997 guarantee Shenzhen Tiantai Jun. 20, 1995 166.00 Joint - No No Jun. 20, 1995 - Petrochemical Co., Ltd responsibility Jun. 20, 1996 guarantee Shenzhen Building Mar. 1, 1998 80.00 Joint - No No Mar.1, 1998 - Materials Group responsibility Mar. 1, 1999 guarantee Shenzhen Jingyuan Apr. 30, 1997 80.00 Joint - No No Apr. 30, 1997- Industry & Trade responsibility Apr. 30, 1998 Company guarantee Hainan Wanda Industry Aug. 16, 1996 3,093.86 Joint - No No Aug. 16, 1996 - & Trade Co., Ltd responsibility Aug. 16, 1997 guarantee 36 Shenzhen Xuena Co., Jun. 10,1995 112.91 Joint - No No Jun. 10, 1995 - Ltd responsibility Dec. 10, 1996 guarantee Shenzhen Light Industry Jul. 31, 1997 273.00 Joint - No Yes Jul. 31, 1997 - Import and Export responsibility Dec. 31, 1999 Corporation guarantee Jilin Lionda Company Jun. 30, 1996 350.00 Joint - No Yes Jun. 30, 1996 - responsibility Dec. 30, 1997 guarantee Shenzhen Big World Mar.1, 1996 1,402.70 Joint - No No Mar. 1, 1996 - Shopping Center responsibility Mar. 1, 1997 guarantee Shenzhen Lionda Apr. 25, 1996 781.50 Joint - No Yes Apr. 25, 1996 - Development Co., Ltd responsibility Apr. 25, 1999 guarantee Shenzhen Lionda Nov. 3, 1996 985.00 Joint - No Yes Nov. 3, 1996- Electric Appliance Co., responsibility Nov. 3, 1999 Ltd guarantee Shenzhen Paper Mar. 15, 1997 1,790.00 Joint - No Yes Mar. 15, 1997 - Manufacturing Company responsibility Mar. 15, 2000 guarantee Shenzhen Lionda Food Sep.1, 1996 2,940.00 Joint - No Yes Sep. 1, 1996 - Staff Co., Ltd responsibility Mar. 1, 2000 guarantee Shenzhen Lionda Aug.13, 1995 6,566.04 Joint - No Yes Aug. 13, 1995 - Material Import & responsibility Aug. 13, 2000 Export Co., Ltd guarantee Hunan Lionda Company Oct. 25, 1997 325.00 Joint - No Yes Oct. 25, 1997 - responsibility Oct. 25, 1998 guarantee Shenzhen Lionda Leke Jul. 4, 1996 12,850.00 Joint - No Yes Jul. 4, 1996 - Box Co., Ltd responsibility Jul. 4, 1998 guarantee Shenzhen Haima Electric Apr. 1, 1995 1,750.00 Joint - No Yes Apr. 1, 1995 - Appliance Co., Ltd responsibility Apr. 1, 2000 guarantee Total guarantee amount occurred in the report period 0.00 Total guarantee balance in the report period（A） 71,739.45 Guarantees for shareholding subsidiaries by the Company Total guarantee amount occurred in the report period for shareholding 0.00 subsidiaries Total guarantee balance in the report period for shareholding subsidiaries（B） 14,697.54 Total guarantee amount of the Company (including guarantees for shareholding subsidiaries) 37 Total guarantee amount（A+B） 86,436.99 Proportion of the Company’s net assets taking up the total guarantee amount -52.94% Including: Guarantee amount for shareholders, the actual controller or its related parties（C） 48,483.23 Guarantee amount for the debts of the guaranteed companies with an 21,118.54 asset-liability ratio of over 70%, directly or indirectly（D） The amount by which the total guarantee amount exceeded 50 percent of the net 16,835.22 assets（E） Total amount of the above three guarantees*（C+D+E） 86,436.99 *Note: When filling the item “total amount of the above three guarantees” (C+D+E), if a guarantee event appeared the three situations mentioned above synchronously, the total should be measured only once. 3. In the report period, the Company had no significant capital management or commissioned loan entrusted by others or the one happened before by lasted up to the report period. 4. In the report period, the Company signed Financial Consultant Agreement with Beijing Zhonghe Yingtai Management Consulting Co., Ltd in Jan., 2007, trying to make the restructuring get somewhere. There were no other significant contracts in the Company. VI. Committed events and corresponding performance by companies or shareholders holding above 5% of shares in the report period or lasting up to this period Impleme ntation Name of Commitment of Note shareholders commit ments 1. As the non-tradable shareholder, Shenzhen Guoyin Investment Group Because the Co., Ltd did not express explicit opinions for the share merger reform; 191.4 million the consideration it should pay in accordance with share merger reform shares of the would be paid by Shenzhen Lionda Group Co., Ltd. Company held by 2. As the S*ST Sunrise shares held by non-tradable shareholder, The the controlling Shenzhen Huashengda Investment Holdings Co., Ltd were frozen, the share shareholder Shenzhen consideration it should pay in accordance with share merger reform merger Shenzhen Lionda Lionda Group would be paid by Shenzhen Lionda Group Co., Ltd. after the payment, if reform Group Co., Ltd Co., Ltd the shares listed, it should return the consideration, or get the agreement did not were frozen of Shenzhen Lionda Group Co., Ltd. After the share merger reform, perform judicially, the when Shenzhen Huashengda Investment Holdings Co., Ltd listed the yet. Company could held non-tradable shares, it should get the agreement of Lionda and let not apply for the Guangdong Sunrise Group Co., Ltd apply listing and trading of the implementation shares to Stock Exchange. of the share 3. The related expenses of share merger reform would be paid by the first merger reform to 38 shareholder, Shenzhen Lionda Group Co., Securities Depository & Clearing Corp. temporarily. VII. In the report period, the Company had no changes in accounting policies and accounting estimates or correction of accounting errors. After executing new accounting standard, no much influence was brought to the operating results or financial status of the Company. VIII. On engaging and dismissing accountant firm of the Company In the report period, the Company continued to engage Shenzhen Dahua Tiancheng Certified Public Accountants as the domestic financial audit entity. Audit expense paid to Shenzhen Dahua Tiancheng Certified Public Accountants by the Company in 2007 was RMB 0.45 million. According to Stipulations on Registered Accountants Periodic Rotation of Audit Requirements in the Securities and Futures Business （ZJKJZ [2003 NO.13), we arranged different accountants to rotate and not a single accountant served us overtime. IX. In the report period, there were no inspections from CSRC, no administrative penalties, informed criticism or public condemnation accruing among the Company, the directors, the supervisors and the senior management staffs of the Company, as well as the shareholders of the Company and actual controller. X. In the report period, investigation, communication and interview of the Company: Reception Reception Reception Reception Main content of discussion and the provided information time place way object Communica Secretariat of A share Re-list time of A share; it can re-list after state-own shares Mar.11, 2007 tion by the Board investor changing into legal person share. telephone Communica Secretariat of A share Re-list time of A share; it can re-list after state-own shares May 6, 2007 tion by the Board investor changing into legal person share. telephone Communica Secretariat of A share Re-list time of A share; it can re-list after state-own shares Aug.29, 2007 tion by the Board investor changing into legal person share. telephone Whether the Company existed restructuring, it was Communica Secretariat of B share informed that the Company strived for the progress of the Nov.7, 2007 tion by the Board investor restructuring work, but could not get somewhere telephone substantially. XI. Other events Share merger reform plan of the Company was voted and approved in the meeting held by the 39 relevant shareholders on Jan. 15, 2007, of which details were as follows: Non-tradable shareholders paid 20.13 million shares to A tradable shareholders registered on the date of record of this share merger reform with their non-tradable shares as consideration arrangement. So they could get tradable rights of all non-tradable shares in A share market. Tradable A shareholders, who registered on the date of record of the reform plan, would get 5 shares consideration by non-tradable shares per 10 A tradable shares. Because the 191.4 million shares of the Company held by the controlling shareholder Shenzhen Lionda Group Co., Ltd were frozen judicially, the Company could not apply for the implementation of the share merger reform to Securities Depository & Clearing Corp. temporarily. 40 Section X Financial Report I. Auditors’ Report Auditors’ Report SH (2008) A. NO. 009 E All Shareholders of Guangdong Sunrise Holdings Company Limited We have audited the accompanying financial statements of Guangdong Sunrise Holdings Company Limited (the “company”), which comprise the consolidated and the Company’s balance sheet as of December 31, 2007, the consolidated and the Company’s income statement, the consolidated and the Company’s statement of changes in equity, the consolidated the Company’s cash flow statements with the accompanied notes to the financial statements for the year then ended 2007. 1. RESPONSIBILITY OF COMPANY’S MANAGEMENT The preparation of the financial statements in accordance with the China Accounting Standards for Enterprises, which issued by the Ministry of Finance of the People’s Republic of China, is the responsibility of the Company’s management. The responsibility comprises (1) designing, implementing and maintaining the internal control system relevant to the preparation of the financial statements, to ensure that the financial statements are free of material misstatement due to fraud or error; (2) selecting and applying appropriate accounting policies; (3) making accounting estimates that are reasonable in the circumstances. 2. MATTERS CAUSED TO DISCLAIMER OF OPINION As presented in Note 7 (7) and Note 12, the Company is under significant financial burdens on short-term repayment obligations and large amounts of liabilities caused by guarantee are indicted, which will affect the going concern basis if the management is not able to vanish shortly. The debts and assets restructuring are still in process, the management believes that after the reconstruction the Company will have ability to operate in the future. As such, the financial statements have been prepared on a going concern basis. However, all the improvement measures mentioned above are in the initial course, we are unable to obtain sufficient and reasonable evidences to assure that the Company will succeed in debt and assets restructuring and will have going concern ability for the future operation, therefore, we are unable to conclude whether the preparation of financial statement for the year ended 2007 is appropriate under the going concern basis. 41 3. AUDITOR’S OPINION Because the impact on the above matters is material, we are unable to express an opinion as to whether the financial statements present fairly, in all material respects, the financial position of the Company as of December 31 2007 and the results of its operations and its cash flows for the year then ended. BDO.Shenzhen Dahua Tiancheng CPAs Certified Public Accountants of China Shenzhen, China Certified Public Accountants of China April 11, 2008 42 Financial statement Balance Sheet Prepared by Guangdong Sunrise Holdings Co., Ltd. 31 Dec. 2007 Unit: RMB Yuan Amount at the period-end Amount at the period-begin Items Consolidation Parent company Consolidation Parent company Current Assets: Monetary funds 2,188.68 2,188.68 76,550.21 76,550.21 Settlement fund reserve Dismantle fund Transaction financial asset Notes receivable Account receivable Account paid in advance Premium receivables Receivables from reinsurers Reinsurance contract reserve receivables Interest receivable 1,931,203.38 1,931,203.38 1,931,203.38 1,931,203.38 Other account receivable 2,391,108.22 2,391,108.22 1,642,030.75 1,642,030.75 Financial assets purchased under agreements to resell Inventories 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 Non-current assets due within 1 year Other current assets Total current assets 6,324,500.28 6,324,500.28 5,649,784.34 5,649,784.34 Non-current assets: Loans and advance Available for sale financial assets Held to maturity investments Long-term account receivable Long-term equity 12,543,375.02 12,543,375.02 15,311,261.02 15,311,261.02 investment Investing property Fixed asset 8,286,902.49 8,286,902.49 8,865,524.91 8,865,524.91 Project in construction Engineering material Fixed asset disposal Bearer biological asset 43 Oil assets Intangible assets Development expense Goodwill Long-term expense to be apportioned Deferred tax assets Other non-current assets Total of non-current assets 20,830,277.51 20,830,277.51 24,176,785.93 24,176,785.93 Total assets 27,154,777.79 27,154,777.79 29,826,570.27 29,826,570.27 Current liabilities: Short-term borrowings 467,553,910.86 467,553,910.86 512,333,288.46 512,333,288.46 Borrowing from Central Bank Deposits and due to banks and other financial institutions Placements from banks and other financial institutions Transaction financial liabilities Notes payable Account payable Account received in advance Financial assets sold under agreements to repurchase Handling charges and commission payable Employee’s compensation 488,108.73 488,108.73 830,641.02 830,641.02 payable Tax payable -1,752.22 -1,752.22 2,021.95 2,021.95 Interest payable 349,492,769.23 349,492,769.23 315,296,522.45 315,296,522.45 Other account payable 156,073,332.14 156,073,332.14 124,450,470.21 124,450,470.21 Due to reinsurers Insurance contract reserve Customer deposits Amount payables under security underwriting Non-current liabilities due within 1 year Other current liabilities Total current liabilities 973,606,368.74 973,606,368.74 952,912,944.09 952,912,944.09 44 Non-current liabilities: Long-term borrowings Debentures payable Long-term payables Specific purpose account payables Provisions for contingent 691,941,907.57 691,941,907.57 693,231,907.57 693,231,907.57 liabilities Deferred tax liabilities Other non-current liabilities Total non-current liabilities 691,941,907.57 691,941,907.57 693,231,907.57 693,231,907.57 Total liabilities 1,665,548,276.31 1,665,548,276.31 1,646,144,851.66 1,646,144,851.66 Owner’s equity Share capital 288,420,000.00 288,420,000.00 288,420,000.00 288,420,000.00 Capital surplus 381,059,098.78 381,059,098.78 381,059,098.78 381,059,098.78 Less: Treasury Stock Reserved fund 138,304,806.89 138,304,806.89 138,304,806.89 138,304,806.89 General risk provision Retained earnings -2,446,177,404.19 -2,446,177,404.19 -2,424,102,187.06 -2,424,102,187.06 Foreign exchange difference Total owners' equity attributable to holding -1,638,393,498.52 -1,638,393,498.52 -1,616,318,281.39 -1,616,318,281.39 company Minority interest Total owner’s equity -1,638,393,498.52 -1,638,393,498.52 -1,616,318,281.39 -1,616,318,281.39 Total liabilities and owner’s 27,154,777.79 27,154,777.79 29,826,570.27 29,826,570.27 equity Income Statement Prepared by Guangdong Sunrise Holdings Co., Ltd Jan.-Dec. 2007 Unit: RMB Yuan Amount of this period Amount of last period Item Consolidation Parent company Consolidation Parent company I. Total sales 1,802,714.10 1,802,714.10 1,261,613.22 1,261,613.22 Including: Sales Interests income Premium income Handling charges and commission income II. Total cost of sales 25,554,085.23 25,554,085.23 -9,803,658.24 -9,803,658.24 Including: Cost of sales 45 Interests expenses Handling charges and commission expenses Claim expenses-net Provision for insurance liability reserve Expenses for reinsurance accepted Payments on surrenders Policyholder dividends Taxes and associate charges Selling and distribution expenses Administrative expenses 3,555,210.04 3,555,210.04 3,309,973.21 3,309,973.21 Financial expense 22,675,168.57 22,675,168.57 21,533,570.48 21,533,570.48 Impairment loss -676,293.38 -676,293.38 -34,647,201.93 -34,647,201.93 Add: gain/(loss) from change in fair value (“-” means loss) Gain/(loss) from investment (“-” means 1,626,114.00 1,626,114.00 7,234,451.66 7,234,451.66 loss) Including: income form investment on affiliated enterprise and jointly enterprise Foreign exchange difference (“-” means loss) III. Business profit (“-” means loss) -22,125,257.13 -22,125,257.13 18,299,723.12 18,299,723.12 Add: non-business income 50,040.00 50,040.00 360,538.92 360,538.92 Less: non-business expense Including: loss from non-current asset disposal IV. Total profit (“-” means loss) -22,075,217.13 -22,075,217.13 18,660,262.04 18,660,262.04 Less: Tax expense V. Net profit (“-” means loss) -22,075,217.13 -22,075,217.13 18,660,262.04 18,660,262.04 Attributable to: Parent company -22,075,217.13 -22,075,217.13 18,660,262.04 18,660,262.04 Minority interest VI. Earnings per share (I) basic earnings per share -0.0765 -0.0765 0.0647 0.0647 (II) diluted earnings per share -0.0765 -0.0765 0.0647 0.0647 Cash Flow Statement Prepared by Guangdong Sunrise Holdings Co., Ltd. Jan.-Dec. 2007 Unit: RMB Yuan Amount of this period Amount of last period Item Consolidation Parent company Consolidation Parent company 1. Cash flows for operating activities: Cash received from sales of goods or rending of services Cash received on deposits and from banks and 46 other financial institutions Net increased cash received on borrowings from central bank Cash received on placements from other financial institutions Premium received Cash received from reinsurance Net increased amount received on policyholder deposit and investment Cash received from disposal of held for trading financial assets Interests, handling charges and commission received Cash received on placements from bank, net Cash received under repurchasing, net Refund of tax and fare received Other cash received relating to operating 5,191,651.89 5,191,651.89 4,394,374.70 4,394,374.70 activities Sub-total of cash inflows 5,191,651.89 5,191,651.89 4,394,374.70 4,394,374.70 Cash paid for goods and services Loans and advances drawn Cash paid to central bank, banks and other financial institutions, net Claims paid Interests, handling charges and commission paid Dividends paid to policyholders Cash paid to and on behalf of employees 936,090.32 936,090.32 985,197.98 985,197.98 Tax and fare paid Other cash paid relating to operating activities 7,433,923.10 7,433,923.10 3,493,373.80 3,493,373.80 Sub-total of cash outflows 8,370,013.42 8,370,013.42 4,478,571.78 4,478,571.78 Net cash flow from operating activities -3,178,361.53 -3,178,361.53 -84,197.08 -84,197.08 2. Cash Flows from Investment Activities: Cash received from return of investments Cash received from investment income 104,000.00 104,000.00 80,000.00 80,000.00 Net cash received from disposal of fixed assets, intangible assets and other long-term assets Proceeds from sale of subsidiaries and other 3,000,000.00 3,000,000.00 operating units Other cash received relating to investment activities Sub-total of cash inflows 3,104,000.00 3,104,000.00 80,000.00 80,000.00 47 Cash paid for acquiring fixed assets, intangible 5,250.00 5,250.00 assets and other long-term assets Cash paid for acquiring investments Net cash used in loans Net cash used in acquiring subsidiaries and other operating units Other cash paid relating to investment activities Sub-total of cash outflows 5,250.00 5,250.00 Net cash flow from investing activities 3,104,000.00 3,104,000.00 74,750.00 74,750.00 3. Cash Flows from Financing Activities: Cash received from absorbing investment Including: Cash received from increase in minority interest Cash received from borrowings Cash received from issuing debentures Other proceeds relating to financing activities Sub-total of cash inflows Cash paid for settling debt Cash paid for distribution of dividends or profit or reimbursing interest Including: dividends or profit paid to minority interest Other cash payments relating to financing activities Sub-total of cash outflows Net cash flow from financing activities 4. Effect of foreign exchange rate changes 5. Increase in cash and cash equivalents -74,361.53 -74,361.53 -9,447.08 -9,447.08 Add : Cash and cash equivalents at year-begin 76,550.21 76,550.21 85,997.29 85,997.29 6.Cash and cash equivalents at the end of the 2,188.68 2,188.68 76,550.21 76,550.21 year 48 GUANGDONG SUNRISE HOLDINGS COMPANY LIMITED STATEMENTS OF CHANGES IN EQUITY (All amounts in RMB Yuan unless otherwise stated) [English Translastion for Reference Only] Items Notes 2007 Owners'equity attributable to parent company Stock Additional Surplus Retained Total capital paid-in capital reserve earnings Others owner’s equity 1. Balance at the (2,424,102,187.06) (1,616,318,281.39) end of last year 288,420,000.00 381,059,098.78 138,304,806.89 - 2. Balance at the beginning of this (2,424,102,187.06) (1,616,318,281.39) 288,420,000.00 381,059,098.78 138,304,806.89 - year 3. Increase/ decrease of (22,075,217.13) (22,075,217.13) amount in this - - - - year Net profit (22,075,217.13) (22,075,217.13) - - - - 4. Balance at the (2,446,177,404.19) (1,638,393,498.52) end of this period 288,420,000.00 381,059,098.78 138,304,806.89 - Legal Person in charge of Person in charge of epresentative: accounting function: accounting department: (The accompanying notes form an integral part of these financial statements) 49 GUANGDONG SUNRISE HOLDINGS COMPANY LIMITED NOTES OF FINANCIAL STATEMENT FOR THE YEAR ENDED DECEMBER 31 2007 (All amounts in RMB Yuan unless otherwise stated) [English Translation for Reference Only] 1. Basic situation of the Company GUANGDONG SUNRISE HOLDINGS COMPANY LIMITED (hereinafter referred to as “the Company”) is established in the People’s Republic of China as a jointly stock company as approved by Government of Shenzhen City (Shen Fu Ban Fu (1993) No. 720) dated on June 7, 1993, the Company restructured from the original “Shenzhen Lionda Group” by raising capital measure. On September 29 1993, upon approval by the China Securities Regulatory Commission, the Company issued common shares in RMB (A share) and foreign capital shares (B share) listed in Shenzhen Stock Exchange. The number of business license of the Company is 4400001001658 and the present registered capital is RMB 288,420,000. On June 13 2002, the Company renamed from “Shenzhen Lionda Holdings Company Limited” to “Guangdong Sunrise Holdings Company Limited”. The major business scope of the Company includes to sale and agent second and third class merchandise in Guangdong Province (goods list is complies with the document YUE JING MAO (1990) 320); export goods transfer to domestic sales or import goods; to sale woodwork (excluding woods), industrial product materials (excluding gold, silver, card and dangerous chemistry products), textile, computers and fittings, rubber products; provide consult service and investment. The registered address of the Company is at 4 Floor, Block 203, Tairan Industry Zone, Chegongmiao, Futian District, and Shenzhen China. 2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS The financial statements prepared by the Company are in accordance with the requirements of China Accounting Standards for Business Enterprises (2006) issued by the Ministry of Finance of the People’s Republic of China (hereinafter referred to as “the Ministry of Finance”). According to China Accounting Standards for Business Enterprise, estimation and assumptions are the requirement when preparing financial statements, which will affect the disclosure of assets, liabilities and the contingent liabilities as of balance sheet date and the profits/losses accounts for the year then ended. As formulated by “Public offering Enterprise data disclosure question and answer No. 7—comparable financial information preparation and presentation in former and new accounting standards transitional period (Zheng Jianhui Kuai Ji Zi (2007) 10), in preparation of comparable financial statements, on the basis of implementation of new accounting 50 standards from Jan. 1, 2007, the Company recognizes the beginning balance of 2007 for balance sheet, based on this and in accordance with the retrospective adjustment principle, the Company recognizes the adjusted comparable balance sheet and income statements as its financial statements . As presented in Note 7 (7) and Note 12, the Company is under significant financial burdens on short-term repayment obligations and large amounts of liabilities caused by guarantee are indicted, which will affect the going concern basis if the management is not able to vanish shortly. The debts and assets restructuring are still in process, the management believes that after the reconstruction the Company will have ability to operate in the future. As such, the financial statements have been prepared on a going concern basis. 3. BASIS OF CONSOLIDATION (1) Accounting policies The accounting policies adopted by the Company are in accordance with the China Accounting Standards for Business Enterprises (2006) issued by the Ministry of Finance (2) Accounting period The accounting year of the Company is from January 1 to December 31. (3) Recording currency The recording currency of the Company is the RMB (Yuan), the statutory currency of the People’s Republic of China. (4) Basis of accounting and measurement The Company follows the accrual basis of accounting. Assets are initially recorded at actual costs. (5) Accounting method for foreign currency transactions All transactions denominated in non-recording currency are translated into RMB at the fixed exchange rate. At the year end, the Company adjusted monetary assets denominated in non-recording currency converted into RMB at the market foreign exchange rates of the balance sheet date. The translation differences raised from above transactions should be recorded into the profits and losses accounts for current period. The net exchange losses arising form loans used for purchase fixed assets should be capitalized in accordance with capitalization principle of loan costs. (6) Cash and cash equivalents The cash of the Company refers to cash on hand and deposits that are available for payment at any time. The cash equivalents refers to short-term and highly liquid investments that are 51 readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value. (7) Provisions for bad accounts The Company recognizes general and specific provision for bad debts based on an assessment of the recoverability of receivables. Specific provisions are made for those receivables on the basis of analysis for each individual accounts which are not possibly collectible. A general provision for the remaining receivables, which is net of accounts for specific provision, is recorded 3% of the receivables. The bad debt is recognized when the bad debt is determined as such when the debtor is bankrupt or dead, and the proceeds from the bankrupt’s estates or the decreased property are unable to cover the debt; or the debtor fails to repay the overdue debt for long period with plain evidences to indicate his inability to do so. (8) Inventories Inventories include raw materials, consignment materials, work in progress, finished goods, periodic collecting delivered finished goods, developed goods and developed cost. Inventories are accounted for initial cost when purchased, and using moving weighted average accounting method when issued. Perpetual inventory system is applied to inventories. Low cost consumables are expensed when using. On the basis of stocktaking at the end of each year, for any inventory is physical damage, part or entire obsolescence or its sales price fall below its cost, which results the cost of the inventory is lower than its net realizable value (the “NRV”), a provision for impairment of inventory should be made. The provision for impairment equals to the difference between cost and NRV for individual item. NRV is the estimated selling price in the ordinary course of business, less the estimated costs to completion and the estimated costs necessary to conclude the sale. (9) Long-term investment (a) Investments in subsidiaries In the individual financial statements of the Company, long-term equity investment in subsidiaries is calculated with cost method, and the cost minus evaluation provision is calculated into the balance sheet at the end of the period. While initial confirmation, the investment costs of long-term equity investment in subsidiaries are measured according to the following principles: − For long-term equity investment in subsidiaries arising from merger of enterprises under the same control, the Company takes the share of book value of owners’ equity of the mergered party acquired on the merger date as the initial investment costs of long-term equity investment. For the difference between the initial investment costs of long-term equity investment and the book value of the paid consideration, premium price of capital stock (or premium price of capital) in capital reserves is modified; if the premium price of capital stock (or premium price of capital) in capital reserves is insufficient to write off, the earning 52 retained is modified. − For long-term equity investment not under the same control, the Company takes the merger costs confirmed on purchase date as the initial investment costs of long-term equity investment. − For long-term equity investment in subsidiaries arising from non-corporate merger, while initial confirmation, for long-term equity investment acquired from cash payment, the Company takes the actually paid purchase price as the initial investment costs. For long-term equity investment obtained from issuing equity securities, the Company takes the fair value of stock equity as initial investment costs. For long-term equity investment invested by investors, the Company takes the value regulated in investments contract or agreements as initial investment costs. (b) Investment on joint enterprises and jointly-run enterprises Investment on joint enterprises and jointly-run enterprises Joint enterprise refers to the enterprise to which the Company and other investors perform joint control according to arrangement of agreements. Joint control refers to mutual control to economic activities according to contracts, and only exists when investors that need to share control power to important financial and operation decision relating to economic activities agree unanimously. Jointly-run enterprise refers to the enterprise to which the Company can perform material influence. Material influence refers to, with power of participating in decision to finance and operation policy of the invested entity, but cannot control or jointly control establishment of these policies with other parties. Long-term equity investment to joint enterprises and jointly-run enterprises is calculated with equity method, except the investment is in accordance with the conditions of holding for sale (namely, the Company has made decision for disposal of this investment, has signed irrevocable transfer agreement with the assignee, and this transfer will be completed within one year). The Company measures the held-for-sale investment to joint enterprises and jointly-run enterprises according to book value and estimated realizable net value which is smaller, and the difference that the book value is higher than the estimated realizable net value is confirmed as devaluation losses of assets. When the investment to joint enterprises and jointly-run enterprises is initially confirmed, for long-term equity investment obtained with cash payment, the Company takes the actually paid purchase price as the initial investment costs. For long-term equity investment obtained from issuing equity securities, the Company takes the fair value of stock equity as initial investment costs. For long-term equity investment invested by investors, the Company takes the value regulated in investments contract or agreements as initial investment costs. The detailed accounting treatments of the Company while calculating with equity method include: − In case the initial investment costs of long-term equity investment is larger than the 53 share of fair value of recognizable net assets of the invested entity as enjoyable while investment, the former is used as costs of long-term equity investment; In case the initial investment costs of long-term equity investment is less than the share of fair value of recognizable net assets of the invested entity as enjoyable while investment, the latter is used as costs of long-term equity investment, and the difference between the costs long-term equity investment and initial investment costs is calculated into the current profits and losses. − After obtaining the investment to joint enterprises and jointly-run enterprises, the Company deducts the amount of debit balance of investment on stock equity confirmed according to the previous accounting criteria and systems, amortized on linear amortization method according to the previous ten years of amortization period from the investment to joint enterprises and jointly-run enterprises as held by the Company before firstly executing China Accounting Standards for Business Enterprises (2006), from the enjoyable or sharable share of net profits and losses realized by the invested entity, and then confirms investment profits and losses and modifies the book value of long-term equity investment; the book value of long-term equity investment is correspondingly reduced according to the distributable part calculated according to profits or cash dividend declared for distribution by the invested entity. While calculating the enjoyable or sharable share of net profits and losses realized by the invested entity, the Company is based on the fair value of recognizable assets of the invested entity when the investment is acquired, if the accounting policies or accounting period of the invested entity are different with the Company, necessary modification has been made to the financial statements of the invested entity according to the accounting policies or accounting period of the Company while calculation with equity method. The part of the internal transaction occurring between the Company and joint enterprises and jointly-run enterprises, belonging to the Company calculated according to share holding proportion, is set off while calculation with equity method. The unrealized losses occurring in internal transactions are fully confirmed if any evidence shows the losses are devaluation losses of relevant assets. The net losses occurred by the Company to joint enterprises and jointly-run enterprises are limited to when the book value of long-term equity investment and the long-term equity of other net investments essentially to joint enterprises and jointly-run enterprises are reduced to zero, except the Company bears the obligation of additional losses. If joint enterprises and jointly-run enterprises realize net profits subsequently, the Company recovers confirming income share amount after the income share amount offsets the loss share amount not confirmed. (c) Other long-term equity investments Other long-term equity investments refer to long-term equity investments without control, joint control or material influence to the invested entity and without quotation in 54 the active market and which fair value cannot be reliably measured. The Company confirms the initial investment costs of this kind of investment according to the above principles for confirmation and measurement of initial costs of investments to joint enterprises and jointly-run enterprises, and performs subsequent measurement with cost method. (d) Provision for long-term investment At each period end, for long-term investment that the market value of investee is continually decreased or the operation condition is worse, which value is considered to be less than the recoverable amount, a provision for impairment should be made. The provision for impairment equals to the difference between the investment’s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition. Impairment losses can not be reversed in subsequent periods. (10) Fixed assets and accumulated depreciation Fixed assets refer to the tangible assets that the Company holds for producing goods, providing services, lease or management and which service life is more than a accounting year. The initial costs of the fixed assets externally purchased include purchase price, relevant taxes and fees and the expenses belonging to the assets as occurred for making the assets to reach the scheduled usable conditions. The initial costs of the fixed assets independently built include materials for the project, direct labor, loan expenses in accordance with capitalized conditions and necessary expenditures occurred before making the assets to reach the scheduled usable conditions. Fixed assets are depreciated using the straight-line method to write off the cost of the assets to their estimated residual values over their estimated useful lives. The estimated residual value of all fixed assets is 10% of their original costs. The annual depreciation rate of fixed assets and estimated useful lives are as follows: Category Estimated useful lives Annual depreciation rate Buildings and plants 20-35 years 2.57%-4.50% Machinery equipment 10-15 years 6.00%- 9.00% Motor vehicles 5 years 18.00% Electronic & other equipments 5 years 18.00% Impairment of fixed assets All fixed assets are reviewed at each period end. If at any time the recoverable amount has declined below the carrying amount due to continuous decline of market price, negative 55 change in technology, physical damage and obsolescence, then impairment has occurred. The provision for impairment of individual fixed assets equals to the differences between the recoverable amount and the carrying amount of that fixed assets. Impairment losses can not be reversed in subsequent periods. (11) Borrowing expenses The borrowing expenses, which are occurred by the Company and can be directly listed into purchase, construction or production of the assets in accordance with capitalized conditions, are capitalized and calculated into the costs of relevant assets. Except the above borrowing expenses, other borrowing expenses are confirmed as financial expenses at the current period of their occurrence. In the period of capitalization, the Company confirms the amount of interest capitalization in each accounting period according to the following method (including amortization of discounting price or premium price): − For special loans borrowed for purchase, construction or production of the assets in accordance with capitalized conditions, the Company confirms them with the amount of the interest expenses of special loans calculated according to actual interest rate of the current period, minus the interest incomes from the not used loan capital that is deposited into bank, or minus the investment earnings acquired from temporary investment. − For the common borrowing occupied for purchasing, constructing or producing the assets in accordance with capitalized conditions, the Company calculates and confirms the interest amount of common borrowings that shall be capitalized, according to the weighted average of capital expenditures of the part that the accumulative asset expenditures exceed the special borrowings, multiplied capitalization rate of the occupied common borrowings. Capitalization rate is confirmed according to the weighted average actual interest rate of common borrowings. When the Company is confirming the actual interest rate of borrowings, the Company discounts the future cash flow of borrowings in the anticipated existence term or any applicable shorter term, as the interest rate used for the current book value of the borrowing. Capitalization term refers to the term from capitalization of borrowing expenses to closing of capitalization, exclusive of the term that the borrowing expenses suspend capitalization. When capital expenditures and borrowing expenses have occurred, and the purchase, construction or production activities necessary for making assets reach the scheduled usable or available-for-sale status have commenced, capitalization of the borrowing expenses starts. When assets purchased, constructed or produced in accordance with capitalized conditions reach the scheduled usable or available-for-sale status, capitalization of borrowing expenses stops. If the assets in accordance with capitalized conditions generate non-normal interruption in the course of purchase, construction or production, and the interruption time exceeds three months, the Company temporarily stops capitalization of borrowing expenses. 56 (12) Revenue recognition Revenue is recognized when it is probable that the benefits will flow to the Group and when the revenue can be measured reliably. Sales of goods Sales of goods are recognized when the goods are delivered and the title has passed. Sales of properties under development are recognized when the properties developed for sale are sold in advance of completion and the outcome of projects can be ascertained with reasonable certainty by reference to the construction progress. Profit is recognized over the course of the development after taking into account of allowance for contingencies. Sales of properties are recognized when all the conditions of sale have been met and the risks and rewards of ownership have been transferred to the buyer. Interest income is accrued on a time proportion basis on the principal outstanding and at the interest rate applicable. Dividend income from investments is recognized when the shareholders’ right to receive payment has been established. (13) Contingent liability The existence of the potential obligations formed by the past transactions or matters shall be validated by occurrence or non occurrence of uncertain matters in the future; the performance of the current obligations formed by the past transactions or matters may not likely cause economic benefits to flow out the Group or the amount of the obligation cannot be reliably measured, the Group will disclose the potential obligation or current obligation as contingent liability. (14) Income tax Confirmation of income tax is involved with judgment to future taxation treatment of some transactions. The Group cautiously evaluates taxation influence of various transactions and calculates corresponding Income taxes. The Group re-evaluates the taxation influence of these transactions on schedule according to the updated taxation regulations and rules. Deferred income tax assets are confirmed according to deductible taxation losses and deductible temporary difference. Deferred income tax assets are only confirmed when the taxable incomes may be likely used for setting off relevant deferred income tax assets, so the management should judge possibility of obtaining future taxable incomes. The Group continually checks the judgment to deferred income taxes, if it is estimated that it may likely obtain realizable future taxable incomes in the future, the corresponding deferred income tax assets will be confirmed. (15) Basis of financial statements Consolidation 57 The consolidated scope of the consolidated financial statements includes the Company and the subsidiaries under control of the Company. Control refers to which is entitled to decide the financial and management policies of a company and by which interest can be obtained from the operation activities of the company. The operation results and financial status of the subsidiaries under control are contained in the consolidated financial statements from control starting date to control closing date. For any subsidiary acquired by the Company through corporate merger under the same control, when the consolidated financial statements for the current period are being prepared, it is deemed that the mergered subsidiaries are entered into the merger scope of the Company when the final control party of the Company starts to perform control to it, and the number at the beginning of the period in the consolidated financial statements and previous comparison statement are made corresponding modification. While the Company is preparing the consolidated financial statements, the assets and liabilities of the mergered subsidiary and their book values are combined into the consolidated balance sheet of the Company and the operation results of the mergered subsidiary are combined into the consolidated profit statement of the Company since the final control party of the Company starts to perform control. For any subsidiary acquired by the Company through corporate merger not under the same control, when the consolidated financial statements for the current period are being prepared, the financial statements of the subsidiary are modified on the basis of recognizable assets, fair values of liabilities as confirmed on the purchase date, and the assets, liabilities and operation results of the purchased subsidiary are combined into the financial statements of the Company as of the purchase date. The consolidation scope is not including the following subsidiaries, for the Company can not control them. Details are shown below: Name Reason Accounting treatment Full provision was made for Shenzhen Lionda Paper Manufacturing It is in loss for years and terminated its long-term investment and Co. Limited business. receivables Full provision was made for Shenzhen Lionda Food Industrial Co. It is in loss for years and terminated its long-term investment and Limited business. receivables Shenzhen Lionda Materials Import & It is in loss for years and terminated its It is terminated business. Export Co., Limited *3 business. It is in loss for years and net asset is Shenzhen Lionda Leke Suitcase Book value of long-term negative. 58 Co.Limited investment is zero. Book value of long-term Shenzhen Lionda Electrical Equipment It is in loss for years and net asset is investment is zero and balances Co. Limited *3 negative. are written-off. Full provision was made for It is in loss for years and net asset is Shenzhen Lionda Hunan Branch long-term investment and negative. balances are written-off. Shenzhen Lionda Light Textile Chemical Full provision was made for It is terminated its business. Industrial Co. Limited *3 long-term investment. Shenzhen Lionda Development Book value of long-term It is terminated its business. Co.Limited *1*3 investment is zero Shenzhen Lionda Property Management Full provision was made for It is terminated its business. Co. Limited long-term investment. Full provision was made for Shanghai Lionda Industrial Co. Ltd. It is terminated its business. long-term investment. Shenzhen Lionda Industrial Trading Co. Full provision was made for It is terminated its business. Ltd.*2 long-term investment. *1 Shenzhen Lionda Development Co. Limited is passed the annual check by Industrial and commercial office but it is ceased its operation actually. The Company provided loan guarantee, which includes principal of RMB320 million and HKD590, contingent liabilities was made for it amounting to 9.313 million. In addition, the Company just burdens the responsibilities and liabilities as a shareholder under PRC law, no other liabilities or risk. *2 Shenzhen Lionda Industrial Trading Co. Ltd. is passed the annual check by Industrial and commercial office but it is ceased its operation actually and cannot be contacted. The Company holds 32% equity interest and trusteeship 20% equity interest for Shenzhen Lionda Industrial Trading Co., Ltd Labor Union. It was be consolidated in the Company by 2003 director’s resolution. According to the director’s resolution in 2005, it is not included in the consolidation scope from 1 January 2005, for it is ceased its business. *3 Above referred other companies are terminated business for years and cannot be contacted. The Company was in lawsuit for guarantee for Zhongwu Materials Import and Export Company. The Company holds 80% equity interest of Shenzhen Lionda Light Textile Chemical Industrial Co. Limited, 95% of Shenzhen Lionda Electrical Equipment Co. Limited, 95% of Shenzhen Lionda Development Co. Limited and 95% of Shenzhen Lionda Materials Import & Export Co., Limited respectively. The referred equity interests have been frozen by Haifeng People Court of Guangdong Province. Details refer to Note 11. (16) Changes in accounting policies and estimations The Company adopted China Accounting Standards for Business Enterprises (CAS) (2006) as of January 1, 2007. At the date of first-time adoption, the Company made retrospective adjustments to other items in accordance with the requirements of “CAS 38 –First-time Adoption of CAS” (CAS 38). Effects for shareholder’s equity please refer to Note 17. changes are shown as below: 59 (a) According to CAS 2- Long-term investment, in the Company’s separate financial statements, investments in subsidiaries were accounted for using the equity method before January 1 2007. Such investments are now accounted for using the cost method. (b) According to CAS 8- Assets impairment, impairment for receivables, inventories, long-term investment and fixed assets is recorded as asset impairment loss, not administrative. (c) According to CAS 9- Staff cost, the Company reclassified accrued payroll, accrued staff benefits and other payables as staff cost payable. (d) According to CAS 18- Income tax, before January 1, 2007, income tax was previously accounted for using tax payable method. As of January 1, 2007, it is accounted for using the liability method. On January 1, 2007, influence on income tax arising from temporary differences between the carrying amounts and the tax bases of assets and liabilities were retrospectively adjusted. The relevant 2006 comparative items have been adjusted accordingly. (e) According to CAS 30- Financial statement presentation, the Company presents other revenue and cost as operating revenue and cost. (f) According to CAS 33- Consolidation financial statement, the Company should use equity method to calculate long-term investment to consolidated subsidiaries before consolidation. 4. CHANGES IN ACCOUNTING PRINCIPLES AND RELATED EFFECTS Changes in accounting principles Effects Adoption CAS from January 1 2007 --- 5. TAXATION The types of taxes applicable to the Company include value added tax (VAT), business tax, city maintenance and construction tax and education surcharge and income tax. Tax rates are as follow: VAT rate 17% Business tax rate 5% City maintenance and construction tax rate 1% of turnover tax Education surcharge rate 3% of turnover tax 60 Income tax rate 15% 6. HOLDING SUBSIDIARIES AND ASSOCIATED COMPANY (1) Holding subsidiaries Place of Investment Proportion of Name of holding subsidiaries Registered capital Business nature registration amount shares held Shenzhen Paper Manufacturing & Manufacturing paper products and RMB Shenzhen RMB 10,400,000 100% Processing Factory printing machinery 10,400,000 Shenzhen Lionda Food Industrial Co., Production of fruit jelly, jelly sweets RMB Shenzhen RMB 6,640,000 100% Ltd. and high strength agar 6,640,000 Shenzhen Lionda Materials Import & Import and export of printing material RMB Shenzhen RMB 7,000,000 100% Export Co., Ltd. and machinery 7,000,000 Shenzhen Lionda Leke Suitcase Co., Production and sale of ABS suitcase and Shenzhen USD 1,400,000 USD 1,400,000 100% Ltd. artificial leather Shenzhen Lionda Electrical Production of vacuum flasks and home RMB Shenzhen RMB 6,000,000 100% Equipment Co., Ltd. electrical fans 6,000,000 Shenzhen Lionda Light Textile RMB Shenzhen RMB 10,000,000 Trading, import and export 100% Chemical Industrial Co., Ltd. 10,000,000 Shenzhen Lionda Development Co., RMB Shenzhen RMB 30,000,000 Property development and management 100% Ltd. 30,000,000 RMB Shenzhen Lionda Hunan Branch Changsha RMB 2,878,000 Import and export trading 100% 2,878,000 Shenzhen Lionda Property Property management, trading of foods RMB Shenzhen RMB 1,600,000 100% Management Co., Ltd. and motor car spare parts 1,600,000 RMB Shanghai Lionda Industrial Co.,Ltd. Shanghai RMB 3,000,000 Trading in light industrial products 100% 3,000,000 Shenzhen Lionda Industrial Trading Import and export trading and property RMB Shenzhen RMB 20,000,000 32% Co. Ltd. management 6,400,000 * The Company’s consolidation scope is not including the above subsidiaries, details refer to Note 3 (20). (2) Associated companies Proportion Place of Investment Name of company Registered capital Business nature of shares registration amount held Shenzhen Lionda Bao Shui Trading Co., RMB Shenzhen RMB 6,000,000 Trading 30% Ltd. 1,800,000 Production of dry batteries and RMB Shenzhen Golden Bell Batteries Co., Ltd. Shenzhen RMB 2,000,000 40% electronic products 800,000 Shenzhen Anmiz Watch & Clock Co., Production of watches, clock parts, RMB Shenzhen RMB 1,5 00,000 30% Ltd counters and meters 450,000 61 RMB Shenzhen Gaokeda Electronic Co. Ltd. Shenzhen RMB 3,000,000 Production of HDSL transmission lines 30% 900,000 Production, transportation and USD Shenzhen Taiyang Tccp Co., Ltd. Shenzhen USD 9,000,000 34% installation of steel, concrete tube 3,060,000 Shenzhen Dong Xiang Electronic Trading of electronic equipment and HKD Shenzhen HKD 9,720,000 11% Enterprise Co. Ltd. parts 1,110,000 RMB Guangdong Guomin investment Co., Ltd. Guangzhou RMB 87,000,000 Investment trusts 9.9% 9,423,800 Baltic Sea Commercial Centre Latvia USD 1,300,000 Hotel operation and commercial service USD 663,000 51% Shanghai Qingpu Yinda Property RMB Qingpu RMB 1,500,000 Property development 30% Development Co. 450,000 Import and export trade of light RMB Shenzhen Zhenhua Group Co., Ltd. Shenzhen RMB 32,280,000 3.44% industrial products and food 1,111,800 Shenzhen Guoyin Investment Group Co., RMB Shenzhen RMB 15,000,000 Industry 5% Ltd. 750,000 USD USD Shenzhen Moscow (Holdings)Co., Ltd. Shenzhen Import and export trade 10% 1,400,000 140,000 RMB RMB Chaozhou Port Develop Co.,Ltd. Shantou Development of port 12% 300,000,000 2,225,000 RMB RMB China International Yacht Club Dalian Property development 10% 30,000,000 12,892,000 Wuxian Taihu Huaqiaocheng Developmen RMB Development and construction of RMB Wuxi 10% and Construction Co., Ltd. 10,000,000 Huaqiaocheng 1,000,000 RMB Provision of law consultant service and RMB Shenzhen Yinzhizuo Club Shenzhen 40% 8,000,000 restaurant 4,000,000 RMB RMB Yueshen Light Industry Trading Co. Shenzhen Import and export of food and textiles 50% 4,920,000 2,460,000 RMB Yueyang Shengang Hotel Co., Ltd.*2 Yueyang RMB 4,000,000 Operation of hotel and nearby retails 75% 3,420,000 RMB Hunan Shenli Special Alloy Co.,Ltd. Yiyang RMB 5,000,000 Production of hard alloy ware 45% 2,250,000 RMB Others 425,000 *1 The Company lost actual control rights on this company and presented as other equity investment calculated with the cost method. *2 This entity translated to the Company as compensation when Shenzhen Plastics Chemical Industrial Co., Ltd. bankruptcy liquated. The transfer registration of Yueyang Shengang Hotel Co., Ltd. is uncertainty, which lead to a lack of financial information of the company. Provision for long-term investment is made by the Company. 7. Notes to Principal Financial Statement Accounts As presented in Note 3(15), the Company didn’t prepare the consolidated financial statements, therefore following data is both consolidated and the Company’s financial data. 62 (1) Cash and Cash Equivalents Closing balance Opening balance Item Currency Original amount Exchange rate RMB Original amount Exchange rate RMB Cash RMB 2,188.68 1.0000 2,188.68 76,550.21 1.0000 76,550.21 Total 2,188.68 76,550.21 (2) Dividends receivable The closing balance of dividends receivable is RMB 1,931,203.38, in which the receivable from Shenzhen Jianian Industrial Co., Ltd. is RMB 1,852,203.38. Shenzhen Jianian Industrial Co., Ltd was an associated company of the Company and the Company transferred its stock right of Shenzhen Jianian Industrial Co., Ltd in 2005. (3) Other receivables a) Closing balance of other receivables analyzed based on risk combination are presented as below: Closing balance Opening balance Item Amount Rate in total Bed debt provision Amount Rate in total Bed debt provision 1. Individual accounts with 389,525,923.53 98.87% 389,525,923.53 390,225,384.25 99.07% 390,225,384.25 large amount 2. Individual accounts without large amount but with major risk after 3,248,223.04 0.83% 2,015,656.43 2,866,851.18 0.73% 1,632,829.57 integrated into credit risk combination 3. Others with small amount 1,194,372.79 0.30% 35,831.18 803,499.84 0.20% 395,490.70 Total 393,968,519.36 100% 391,577,411.14 393,895,735.27 100% 392,253,704.52 Total for top 5 companies 366,662,228.02 93.07% 366,662,228.02 367,361,688.74 93.26% 367,361,688.74 Total for related parties 116,677,580.26 29.62% 115,712,762.55 349,486,333.23 88.73% 349,193,109.39 (i) After assessing of the recoverability of other receivables, specific provisions are applied to the below companies based on the ageing of receivables. Item Name of company Amount Bed debt provision Note Other Shenzhen Jijian investment Co., Ltd. 5,724,962.00 5,724,962.00 Over 3 years, unrecoverable receivables Shenzhen Post Office 3,000.00 3,000.00 Deposit before 1990 Zhonghua Chuangye Group 4,035,732.00 4,035,732.00 Long aging，the company switching The company under balance ， Shenzhen Taiyang Tccp Co., Ltd. 25,686,735.00 25,686,735.00 unrecoverable 63 Shenzhen Xiancheng Co., Ltd. 24,876,389.27 24,876,389.27 The company dismissed，unrecoverable Shanghai Hengda Real Estate 2,137,000.00 2,137,000.00 The company dismissed，unrecoverable Development Co., Ltd. Shenzhen Lionda Food Industrial Co., 4,998,701.51 4,998,701.51 The company closed Ltd. Shenzhen Lionda Development Co., Ltd. 55,362,158.24 55,362,158.24 Liquidation of the company Shenzhen Keruite New Materials Co., 214,000.00 214,000.00 The company dismissed，unrecoverable Ltd. The company under balance ， Shenzhen Jiadeng Trade Co., Ltd 1,008,500.00 1,008,500.00 unrecoverable The company under balance ， Shenzhen Yingte Enterprise Co., Ltd. 477,539.63 477,539.63 unrecoverable The company under balance ， Shenzhen Lida Co., Ltd. 146,286.00 146,286.00 unrecoverable Shenzhen China Bicycle Company The company under balance ， 232,801,657.06 232,801,657.06 (Holdings) Limited unrecoverable Shenzhen Lionda Materials Import & The company under balance ， 27,935,288.45 27,935,288.45 Export Co., Ltd. unrecoverable Shenzhen Haima Electric Appliance Co., The company under balance ， 285,838.32 285,838.32 Ltd. unrecoverable Shenzhen Xingda Industry & Trade Co., 4,958,800.00 4,958,800.00 The company closed，unrecoverable Ltd. Others 850,871.86 850,871.86 Long aging，unrecoverable Total 391,503,459.34 391,503,459.34 (ii) The category of single accounts without large amount but with major risk after integrated into credit risk combination is defined base on the characteristics of the Company, the aging of debts over three years are with high risk to recoverable. According to that, the accounts with single amount lower than RMB 1,000,000 and aging over three years are classified into the category. (iii) There is no such amount belongs to shareholders who hold 5% or more than 5% voting rights. b) Closing balance of other receivables analyzed based on aging are presented as below: Closing balance Opening balance Aging Amount Rate in total Bed debt provision Amount Rate in total Bed debt provision Within 1 year 1,247,146.43 0.31% 204,845.12 334,240.62 0.08% 41,016.78 1 to 2 years 31,948.00 0.01% 31,948.00 5,387,944.84 1.37% 116,033.54 2 to 3 years 5,191,118.84 1.32% 4,965,769.57 2,947,081.00 0.75% 2,947,081.00 Over 3 years 387,498,306.09 98.36% 386,374,848.45 385,226,468.81 97.80% 389,149,573.20 Total 393,968,519.36 100% 391,577,411.14 393,895,735.27 100% 392,253,704.52 64 (4) Inventories and Provision Closing balance Opening balance Item Book value Carrying amount Book value Carrying amount developed cost 22,912,610.00 2,000,000.00 22,912,610.00 2,000,000.00 Total 22,912,610.00 2,000,000.00 22,912,610.00 2,000,000.00 Provision loss for Opening balance Increase Decrease Closing balance Note inventories Individual analysis developed cost 20,912,610.00 --- --- 20,912,610.00 method Total 20,912,610.00 --- --- 20,912,610.00 (5) Long-term equity investment Details are presented as below: Closing balance Opening balance Item Devaluing Book Balance Devaluing provision Book value Book Balance Book value provision Investment in 10,000,000.00 --- 10,000,000.00 10,000,000.00 --- 10,000,000.00 stocks Investment in 148,282,938.60 148,282,938.60 --- 148,282,938.60 148,282,938.60 --- subsidiaries Investment in associated 6,394,619.43 4,963,089.41 1,431,530.02 9,162,505.43 4,963,089.41 4,199,416.02 companies Other equity 28,611,930.27 27,500,085.27 1,111,845.00 41,503,930.27 40,392,085.27 1,111,845.00 investment Total 193,289,488.30 180,746,113.28 12,543,375.02 208,949,374.30 193,638,113.28 15,311,261.02 a) Investment in stocks Rate in quantity of registered Initial Opening Unit invested Item Increase Decrease Closing balance shares capital of investment cost balance invested unit legal Five Rings(Group) representativ 2,500,000.00 1.73% 5,000,000.00 5,000,000.00 --- --- 5,000,000.00 Shareholding Co., Ltd. e share legal Beijing Vantone representativ 5,500,000.00 --- 5,000,000.00 5,000,000.00 --- --- 5,000,000.00 Industrial Co.,Ltd e share 65 Subtotal 10,000,000.00 10,000,000.00 --- --- 10,000,000.00 * All shares presented above were sequestered by the Middle Court in Shenzhen in September 2002. ** The amount of 5,500,000.00 legal representative shares of Beijing Vantone Industrial Co.,Ltd held by the Company were sold by auction by Court, but the auction was not finished then. As the stocks investments were sequestered, the Company is not able to obtain any auction information. b) Investment in subsidiaries calculated under the cost method Rate in Invested registered Initial investment Unit invested Opening balance Increase Decrease Closing balance term capital of cost invested unit Shenzhen Lionda Property --- 100% 1,600,000.00 1,600,000.00 --- --- 1,600,000.00 Management Co., Ltd. Shenzhen Paper Manufacturing & 11 years 100% 35,059,679.80 35,059,679.80 --- --- 35,059,679.80 Processing Factory Shenzhen Lionda Food Industrial 20 years 100% 15,400,000.00 15,400,000.00 --- --- 15,400,000.00 Co., Ltd. Shenzhen Lionda Materials Import 20 years 100% 7,155,864.39 7,155,864.39 --- --- 7,155,864.39 & Export Co., Ltd. Shenzhen Lionda Leke Suitcase 20 years 100% 5,685,355.45 5,685,355.45 --- --- 5,685,355.45 Co.Limited Shenzhen Lionda Electrical 30 years 100% 6,000,000.00 6,000,000.00 --- --- 6,000,000.00 Equipment Co., Ltd. Shenzhen Lionda Development Co., 20 years 100% 54,806,675.03 54,806,675.03 --- --- 54,806,675.03 Ltd. Shenzhen Lionda Light Textile 20 years 100% 11,026,863.93 11,026,863.93 --- --- 11,026,863.93 Chemical Industrial Co., Ltd. Shenzhen Lionda Hunan Branch --- 100% 2,148,500.00 2,148,500.00 --- --- 2,148,500.00 Shenzhen Lionda Industrial Trading --- 32% 6,400,000.00 6,400,000.00 --- --- 6,400,000.00 Co. Ltd. Shanghai Lionda Industrial Co.,Ltd. --- 100% 3,000,000.00 3,000,000.00 --- --- 3,000,000.00 Subtotal 148,282,938.60 148,282,938.60 --- --- 148,282,938.60 c) Investment in associated companies calculated under the equity method Rate in Addition or registered Initial Accumulated Invested Opening decrease of Cash Closing Unit invested capital of investment increase or term balance current period dividends balance invested cost decrease equities unit Shenzhen Jianda 30 years 20% 1,570,965.81 2,733,051.09 (2,733,051.09) --- (1,570,965.81) --- Machinery Co., Ltd. * Shenzhen Lionda Bao Shui 10 years 30% 1,800,000.00 --- --- --- (1,800,000.00) --- Trading Co., Ltd. Shenzhen Golden Bell 30 years 40% 1,434,060.25 1,466,364.93 69,165.09 104,000.00 (2,530.23) 1,431,530.02 Batteries Co., Ltd. Shenzhen Anmiz Watch & 30 years 30% 510,735.33 413,358.58 --- --- (97,376.75) 413,358.58 66 Clock Co., Ltd Shenzhen Gaokeda 10 years 30% 900,000.00 831,720.00 --- --- (68,280.00) 831,720.00 Electronic Co. Ltd. Shenzhen Taiyang Tccp 20 years 34% 7,825,944.20 --- --- --- (7,825,944.20) --- Co., Ltd. Shanghai Qingpu Yinda --- 30% 639,886.25 639,886.25 --- --- --- 639,886.25 Property Development Co. Shenzhen Yinzhizuo Club --- 50% 640,000.00 640,000.00 --- --- --- 640,000.00 Yueshen Light Industry --- 50% 188,124.58 188,124.58 --- --- --- 188,124.58 Trading Co. Hunan Shenli Special Alloy --- 45% 2,250,000.00 2,250,000.00 --- --- --- 2,250,000.00 Co.,Ltd. Subtotal 17,759,716.42 9,162,505.43 (2,663,886.00) 104,000.00 (11,365,096.99) 6,394,619.43 * The Company was pleaded by China Everbright Bank Shenzhen Branch due to loan guarantee for Shenzhen Plastics Chemical Industrial Co., Ltd. According to the decree of Shenzhen Intermediate People's Court, the Company commuted 20% of equity of Shenzhen Jianda Machinery Co., Ltd. as RMB 1,290,000 to China Everbright Bank Shenzhen Branch in current period. d) Other equity investment calculated under the cost method Rate in Invested Unit invested registered capital Opening balance Increase Decrease Closing balance term of invested unit Colin Company --- 66.67% 201,010.00 --- --- 201,010.00 Yueyang Shengang Hotel Co., Ltd. *1 --- 75% 3,420,000.00 --- --- 3,420,000.00 Hunan Lionda Property Company --- 100% 80,000.00 --- --- 80,000.00 Guangdong Guomin investment Co., Ltd. --- 9.90% 9,423,870.00 --- --- 9,423,870.00 Shenzhen Zhenhua Group Co., Ltd. 20 years 3.44% 1,111,835.00 --- --- 1,111,835.00 Shenzhen Guoyin Investment Group Co., Ltd. --- 5% 650,000.00 --- --- 650,000.00 Shenzhen Moscow(Holdings)Co., Ltd. --- 10% 607,998.68 --- --- 607,998.68 Chaozhou Port Develop Co.,Ltd. --- 12% 2,225,000.00 --- --- 2,225,000.00 China International Yacht Club *2 --- 10% 12,892,000.00 --- 12,892,000.00 --- Wuxian Taihu Huaqiaocheng Development --- 10% 2,000,000.00 --- --- 2,000,000.00 and Construction Co., Ltd. Shenzhen Dong Xiang Electronic Enterprise 15 years 11% 5,379,464.94 --- --- 5,379,464.94 Co. Ltd. Baltic Sea Commercial Centre --- 51% 3,368,751.65 --- --- 3,368,751.65 Baota Island --- --- 144,000.00 --- --- 144,000.00 Subtotal 41,503,930.27 --- 12,892,000.00 28,611,930.27 * Yueyang Shengang Hotel Co., Ltd. was transferred its interest to the Company as compensation when Shenzhen Plastics Chemical Industrial Co., Ltd. bankruptcy liquided, the transfer registration of Yueyang Shengang Hotel Co., Ltd. is uncertainty, which lead to a lack of financial information of the company. ** The Company entered into an agreement of equity transferring with Shenzhen Shengzhuo Industrial Co., Ltd. on August 22 2002, the Company received interest transfer revenue in current period as translated 10% of equity of China International Yacht Club e) Movement in Provision 67 Current disposal Current Transferred back Transferred out Unit invested Opening balance Closing balance addition due to goods due to other Total value rise reason Shenzhen Lionda Property Management 1,600,000.00 --- --- --- --- 1,600,000.00 Co., Ltd. Shenzhen Paper Manufacturing & 35,059,679.80 --- --- --- --- 35,059,679.80 Processing Factory Shenzhen Lionda Food Industrial Co., 15,400,000.00 --- --- --- --- 15,400,000.00 Ltd. Shenzhen Lionda Materials Import & 7,155,864.39 --- --- --- --- 7,155,864.39 Export Co., Ltd. Shenzhen Lionda Leke Suitcase 5,685,355.45 --- --- --- --- 5,685,355.45 Co.Limited Shenzhen Lionda Electrical Equipment 6,000,000.00 --- --- --- --- 6,000,000.00 Co., Ltd. Shenzhen Lionda Development Co., 54,806,675.03 --- --- --- --- 54,806,675.03 Ltd. Shenzhen Lionda Light Textile 11,026,863.93 --- --- --- --- 11,026,863.93 Chemical Industrial Co., Ltd. Shenzhen Lionda Hunan Branch 2,148,500.00 --- --- --- --- 2,148,500.00 Shenzhen Lionda Industrial Trading Co. 6,400,000.00 --- --- --- --- 6,400,000.00 Ltd. Shanghai Lionda Industrial Co.,Ltd. 3,000,000.00 --- --- --- --- 3,000,000.00 Shenzhen Anmiz Watch & Clock Co., 413,358.58 --- --- --- --- 413,358.58 Ltd Shenzhen Gaokeda Electronic Co. Ltd. 831,720.00 --- --- --- --- 831,720.00 Shanghai Qingpu Yinda Property 639,886.25 --- --- --- --- 639,886.25 Development Co. Shenzhen Yinzhizuo Club 640,000.00 --- --- --- --- 640,000.00 Yueshen Light Industry Trading Co. 188,124.58 --- --- --- --- 188,124.58 Hunan Shenli Special Alloy Co.,Ltd. 2,250,000.00 --- --- --- --- 2,250,000.00 Colin Company 201,000.00 --- --- --- --- 201,000.00 Yueyang Shengang Hotel Co., Ltd. 3,420,000.00 --- --- --- --- 3,420,000.00 Current disposal Current Transferred back Transferred out Unit invested Opening balance Closing balance addition due to goods due to other Total value rise reason Hunan Lionda Property Company 80,000.00 --- --- --- --- 80,000.00 Guangdong Guomin investment Co., 9,423,870.00 --- --- --- --- 9,423,870.00 Ltd. Shenzhen Guoyin Investment Group 650,000.00 --- --- --- --- 650,000.00 Co., Ltd. 68 Shenzhen Moscow(Holdings)Co.,Ltd. 607,998.68 --- --- --- --- 607,998.68 Chaozhou Port Develop Co.,Ltd. 2,225,000.00 --- --- --- --- 2,225,000.00 China International Yacht Club * 12,892,000.00 --- --- 12,892,000.00 12,892,000.00 --- Wuxian Taihu Huaqiaocheng Development and Construction Co., 2,000,000.00 --- --- --- --- 2,000,000.00 Ltd. Shenzhen Dong Xiang Electronic 5,379,464.94 --- --- --- --- 5,379,464.94 Enterprise Co. Ltd. Baltic Sea Commercial Centre 3,368,751.65 --- --- --- --- 3,368,751.65 Baota Island 144,000.00 --- --- --- --- 144,000.00 合计 193,638,113.28 --- --- 12,892,000.00 12,892,000.00 180,746,113.28 * The Company entered into an agreement of equity transfer with Shenzhen Shengzhuo Industrial Co., Ltd. on August 22 2002. As a result, the Company received stock transfer revenues in current period as translated 10% of equity of China International Yacht Club and wrote off the investment and related provision for China International Yacht Club. (6) Fixed assets and accumulated depreciation Cost of fixed asset Opening balance Increase Decrease Closing balance Buildings and plants 14,594,116.36 --- --- 14,594,116.36 Motor vehicle 8,167,086.55 --- --- 8,167,086.55 Electronic equipment 4,026,910.50 --- --- 4,026,910.50 and others Total 26,788,113.41 --- --- 26,788,113.41 Accumulated depreciation Buildings and plant 6,474,370.16 570,897.72 --- 7,045,267.88 Motor vehicle 7,760,957.43 --- --- 7,760,957.43 Electronic equipment 3,687,260.91 7,724.70 --- 3,694,985.61 and others Total 17,922,588.50 578,622.42 --- 18,501,210.92 Net Value 8,865,524.91 8,286,902.49 * The Company’s book value of RMB 14,410,531.65 of buildings and plants didn’t achieve property certificate of buildings and plant. Due to arrearage dispute with Shenzhen Non-ferrous Metals, the book value of RMB 6,759,920.35 of buildings and plant was frozen by Middle Court of Shenzhen on March 31, 2006. ** The Company determined that there is no fixed assets impairment loss existence, therefore there is no provision recorded at the year end. (7) Short-term loans 69 Closing balance Opening balance Type of loan Original amount Exchange rate RMB Original amount Exchange rate RMB Loans from bank Guarantee RMB 55,378,000.00 1.0000 55,378,000.00 55,378,000.00 1.0000 55,378,000.00 HKD* 12,109,722.00 0.9364 11,339,543.68 16,109,722.00 1.0047 16,185,437.69 USD 10,689,262.70 7.3046 78,080,788.32 10,689,262.70 7.8087 83,469,245.65 Subtotal 144,798,332.00 155,032,683.34 Loans from other company RMB 237,635,500.00 1.0000 237,635,500.00 237,635,500.00 1.0000 237,635,500.00 HKD* 31,428,672.00 0.9364 29,429,808.46 59,850,280.00 1.0047 60,131,576.32 USD 7,624,000.00 7.3046 55,690,270.40 7,624,000.00 7.8087 59,533,528.80 Subtotal 322,755,578.86 357,300,605.12 Total 467,553,910.86 512,333,288.46 * All of loans presented above are overdue. ** The creditor’s right of the loan with amount of HKD 32,000,000 was transferred to China Xinda Asset Management Corporation by Bank of China Shenzhen Branch on 31 December 2003. The China Xinda Asset Management Corporation transferred the creditor’s right to Glenmore Investment Limited on 27 December 2005. On February 1 2007, Glenmore Investment Limited came to an agreement with Addvalue holdings Limited to transfer the creditor’s right to Addvalue holdings Limited. *** The creditor’s right of the loan with amount of RMB 8,580,000 was transferred to Guangdong Finance Trust And Investment Co.,Ltd. by Guangdong Development Bank Nanyuan Road Office. **** The reason why a decrease of loans in HKD in current period is Shenzhen Shenbao Industrial Co., Ltd. repaid loans for the Company due to joint liability of guarantee, in which paid Shenzhen Development Bank Nantou Branch for a principal of HKD 4,000,000 and Glenmore Investment Limited a principal of HKD 28,421,608.00. (8) Payroll and remunerations payable to staff Current period Current period Item Opening balance Closing balance accrual payment 1.Salaries,bonuses,allowances --- 721,014.12 721,014.12 --- and subsidies 2.Welfare fund 355,012.41 (327,653.01) 27,359.40 --- 3. Social securities --- 89,394.79 89,394.79 --- 4. Subsidies for trade union and 475,628.61 13,770.12 1,290.00 488,108.73 70 education fund Total 830,641.02 496,526.02 839,058.31 488,108.73 (9) Taxes payable Taxes Closing balance Opening balance Individual income tax (1,752.22) 2,021.95 Total (1,752.22) 2,021.95 (10) Interest payable The closing balance of interest payable is RMB 349,492,769.23, which is the interest payable for short loans over the years. According to one-year RMB loan interest rate, the interest payable of the Company is RMB 34,196,246.78 in current year. (11) Other payables Closing balance Opening balance Aging Amount Rate in total Amount Rate in total Within 1 year 37,710,107.62 24.16% 10,387,880.94 8.35% 1 to 2 years 4,300,635.25 2.75% 5,301,853.46 4.26% 2 to 3 years 5,301,853.46 3.40% 19,807,058.71 15.91% Over 3 years 108,760,735.81 69.69% 88,953,677.10 71.48% Total 156,073,332.14 100% 124,450,470.21 100% * The main reason why an increase of RMB 31,622,816.93 (25.41% in total) in opening balance of other payables is the amount of payables to Shenzhen Shenbao Industrial Co., Ltd. has increased to RMB 33,652,240.56.Shenzhen Shenbao Industrial Co., Ltd. repaid loans with a principal of HKD 32,421,608.00 for the Company due to joint liability of guarantee. ** In closing balance of accounts payable, the amount subjects to shareholders who hold 5% or more voting rights is RMB 3,955,531.80. The main companies of accounts receivable are presented below: Name of company Amount Note Shenzhen Shenbao Industrial Co., 43,703,906.42 Repaid short-term loans Xin Gang Ao Company 29,958,573.60 Current account Shenzhen Textile(Holdings)Co. Ltd. 24,000,000.00 Current account Singapore Ende 19,090,000.00 Current account Total 116,752,480.02 71 (12) Contingent liability Item Closing balance Opening balance Note Contingent liability 691,941,907.57 693,231,907.57 Overdue of foreign guarantee loans and most * The Company was indicted by Shenzhen Branch China Everbright Bank due to loan guarantee for Shenzhen Plastics Chemical Industrial Co., Ltd.. According to the decree of Shenzhen Intermediate People's Court, the Company commuted 20% of equity of Shenzhen Jianda Machinery Co., Ltd. as RMB 1,290,000 to China Everbright Bank Shenzhen Branch in current period. As a result, the Company reduced the contingent liability by RMB 1,290,000. (13) Stock capital Current period addition(decrease) Bonus Share from New Item Opening balance Allotment Others Subtotal Closing balance share public reserve issue I. Un-traded shares 1. Founders’ shares --- --- --- --- --- --- --- --- Included: State owned shares --- --- --- --- --- --- --- --- State owned legal --- --- --- --- --- --- --- --- representative held shares Domestic legal 17,160,000.00 --- --- --- --- --- --- 17,160,000.00 representative held shares Others --- --- --- --- --- --- --- --- 2. Non-founders’ shares --- --- --- --- --- --- --- --- Included: State held shares --- --- --- --- --- --- --- --- State owned legal person --- --- --- --- --- --- --- --- held shares Domestic legal 191,400,000.00 --- --- --- --- --- --- 191,400,000.00 representative held shares Internal employee held --- --- --- --- --- --- --- --- shares Domestic natural representative --- --- --- --- --- --- --- --- held shares Current period addition(decrease) Bonus Share from New Item Opening balance Allotment Others Subtotal Closing balance share public reserve issue Initial share --- --- --- --- --- --- --- --- Others --- --- --- --- --- --- --- --- 3. Preference share --- --- --- --- --- --- --- --- Total of shares not traded 208,560,000.00 --- --- --- --- --- --- 208,560,000.00 II. Shares traded 72 1. RMB common shares domestic 40,260,000.00 --- --- --- --- --- --- 40,260,000.00 listed 2. Foreign currency shares 39,600,000.00 --- --- --- --- --- --- 39,600,000.00 domestic listed 3. Foreign currency shares --- --- --- --- --- --- --- --- overseas listed 4. Others --- --- --- --- --- --- --- --- Total of shares traded 79,860,000.00 --- --- --- --- --- --- 79,860,000.00 III. Total of shares 288,420,000.00 --- --- --- --- --- --- 288,420,000.00 Above listed capital paid in has been checked by Shenzhen Zhixin Certified Public Accountants and reported in the Capital Verification Report coded Shen Zhi Xin Yan Zi [1996] NO.007. (14) Additional Paid-in Capital Item Opening balance Increase Decrease Closing balance Share premium 234,019,470.63 --- --- 234,019,470.63 Other capital surplus 147,039,628.15 --- --- 147,039,628.15 Total 381,059,098.78 --- --- 381,059,098.78 (15) Surplus reserve Item Opening balance Increase Decrease Closing balance Mandatory surplus 97,683,685.99 --- --- 97,683,685.99 reserve fund Random surplus 40,621,120.90 --- --- 40,621,120.90 reserve fund Total 138,304,806.89 --- --- 138,304,806.89 (16) Retained Earnings Item Current period Net profit (22,075,217.13) Add: Retained Earnings at beginning of the year (2,424,102,187.06) Closing balance at the year end (2,446,177,404.19) (17) Operating income 73 Current period Last period Other operations Revenue Cost Profit Revenue Cost Profit Property rental 1,802,714.10 --- 1,802,714.10 1,261,613.22 --- 1,261,613.22 (18) Finance cost Item Current period Last period Interest expense 34,811,882.50 29,004,836.20 Less: interest income 6,776.52 5,207.91 Exchange loss (12,130,740.75) (7,466,643.61) Others 803.34 585.80 Total 22,675,168.57 21,533,570.48 * The interest expense in current period is increased due to the influence of interest of loans. The exchange loss in current period is decreased due to a fall in exchange rate of US dollars and HK dollars. (19) Asset impairment loss Item Current period Last period 1. Bad debt loss (676,293.38) (34,647,201.93) 2. Inventory impairment loss --- --- 3. Long-term equity investments impairment --- --- loss Total (676,293.38) (34,647,201.93) The difference analysis of impairment loss between current period and prior period: the income from prior year was because the Company reversed the provision of RMB 34,537,251.46 due to the offset of credits and debts. (20) Investment income Item Current period Last period Gains from associated and joint venture company 69,165.09 (25,548.34) Gains from transfer of equity investment 1,556,948.91 7,260,000.00 Total 1,626,114.00 7,234,451.66 (21) Non-operating income Item Current period Last period Gains from disposal of fixed assets --- --- Others 50,040.00 360,538.92 Total 50,040.00 360,538.92 (22) Other cash received from operating activities 74 Item Current period Current accounts 3,382,161.27 Rental income 1,802,714.10 Interest income 6,776.52 Total 5,191,651.89 (23) Other cash paid from operating activities Item Current period Motor vehicle expenses 162,518.00 Books and newspaper expenses 2,280.00 Staff training expense 1,200.00 Rental charge 193,826.88 Office expense 268,675.20 Traveling expenses 17,490.00 Business expenses 70,360.00 Water and electricity fees 14,861.83 Others 36,688.00 Public offering expenses 235,000.00 Litigation fare 387,968.00 Telephone charges 15,028.21 Audit fee 450,000.00 Board of directors meetings expenses 119,000.00 Attorney fees 50,000.00 Advisory fee on company reorganization 200,000.00 Special funds on company reorganization 257,223.00 Current accounts 4,951,803.98 Total 7,433,923.10 (24) Cash and cash equivalent Item Current period 1. Cash 2,188.68 Include: cash on hand 2,188.68 2. Cash equivalent --- Include: Bond investment matured in three months --- 3. Closing balance of cash and cash equivalent 2,188.68 75 Include: restricted use of cash and cash equivalent --- 8. Supplemental Information for Cash Flow Statement Supplemental information Amount 1, Adjustments to reconcile net income to net cash provided by operating activities: Net income (22,075,217.13) Impairment provision for assets (676,293.38) Depreciation for fixed assets 578,622.42 Amortization for intangible assets --- Amortization for long-term prepayment --- Loss on disposal of fixed assets, intangible assets and --- others long-term assets loss on variance of fair value --- Finance cost 22,681,141.75 Loss on investment (1,626,114.00) Decrease of deferred tax assets --- Decrease of inventories --- Decrease of operating receivable account items 1,362,784.09 Increase of operating payable account items (3,423,285.28) Others --- Net cash flow from operating activities (3,178,361.53) 2.significant investing and financing activities for non cash items: Offering shares to specific shareholders --- Investment from assets transfer --- Financing leased fixed assets --- 3.net increase (decrease) for cash and cash equivalents Ending balance for cash 2,188.68 Decrease: beginning balance for cash 76,550.21 Increase: ending balance for cash equivalents --- Decrease: beginning balance for cash equivalents --- Net increase (decrease) in cash and cash equivalents (74,361.53) 9. Non-operating Losses and Profits Amount during current Amount during prior Description year year 1 losses/gains on disposal of non-current assets (1)net loss/profit on disposal of fixed-assets --- --- (2) net loss/profit on disposal of intangible assets --- --- (3) net loss/profit on disposal of long-term investment 1,556,948.91 --- 76 Net loss/profit on disposal of non-current assets 1,556,948.91 --- 2.government subsidy recognized in current income --- --- 3.current net loss/profit generated from beginning of year to acquisition date from subsidiaries under --- --- common control 4.revese for recognized provision 699,460.72 34,537,251.46 5.net losses/profit from other non-operating items --- --- (1)non-operating income 50,040.00 360,538.92 (2)decrease: non-operating expense --- --- Net of non-operating income and expenses 50,040.00 360,538.92 Total of non-operating losses/profit before deduction 2,306,449.63 34,897,790.38 of income tax Decrease: amount of income tax --- --- Total of non-operating losses/profit after deduction of 2,306,449.63 34,897,790.38 income tax Decrease: amount of minority interest --- --- Total of non-operating loss/profit after deduction of 2,306,449.63 34,897,790.38 minority interest 10 Related Party Relationship and Transactions (1) The related parties that don’t control or not controlled by the Company Name of related parties Relationship with the Company Shenzhen Investment Holding Corporation The prior controlled shareholder Shenzhen Lionda Bao Shui Trading Co., Ltd. Associated company Shenzhen Taiyang Tccp Co., Ltd. Associated company Shenzhen Guangyingda Industrial Co., Ltd. The subsidiary of controlled shareholder Xinshiji Water Technology Co., Ltd. The subsidiary of controlled shareholder Shenzhen Oriental Enterprise Co., Ltd The subsidiary of controlled shareholder Shenzhen Gaokeda Electronic Co. Ltd. Associated company Yue-Shen Light Industry & Trading Company Associated company Beijing Sun Pipeline Co., Ltd The subsidiary of controlled shareholder Name of related parties Relationship with the Company Shenzhen Keruite New Materials Co., Ltd. Associated company Shenxin Enterprise Co., Ltd. Associated company Shenzhen Jiadeng Trade Co., Ltd Subsidiary of associated company Shenzhen Fuguanghao Industrial Co., Ltd. Subsidiary of associated company Shenzhen Yingte Enterprise Co., Ltd. Associated company Shenzhen Yuda Import & Export Co., Ltd. The subsidiary of controlled shareholder 77 Shenzhen Paina Garment Co., Ltd. The subsidiary of controlled shareholder Shenzhen Xingji Industry Co., Ltd. Shareholder of subsidiary Shenzhen Ke’Enda Technology Co., Ltd. The subsidiary of controlled shareholder (2)The related parties that control or controlled by the Company Controlled shareholder Name of related Legal Registered Shares or interest Relationship with the Business type Operating scope parties representative capital held Company Limited Invested in manufacture, The controlled Shenzhen Lionda 586,490k liability Fenbo Yang commerce and 66.36% shareholder of the Group Co., Ltd. yuan enterprise import/export business Company The list for non-consolidated subsidiaries Name of related parties Relationship with the Company Shenzhen Lionda Light Textile Chemical Subsidiary Industrial Co., Ltd. Shenzhen Lionda Hunan Branch Subsidiary Shenzhen Lionda Electrical Equipment Co., Ltd. Subsidiary Shenzhen Paper Manufacturing & Processing Subsidiary Factory Shenzhen Lionda Leke Suitcase Co.Limited Subsidiary Shenzhen Lionda Food Industrial Co., Ltd. Subsidiary Shenzhen Goldstar Printing Factory Subsidiary Shenzhen Lionda Development Co., Ltd. Subsidiary Shenzhen Lionda Materials Import & Export Subsidiary Co., Ltd. Shenzhen Lionda Property Management Co., Subsidiary Ltd. Shanghai Lionda Industrial Co.,Ltd. Subsidiary Shenzhen Lionda Industrial Trading Co. Ltd. Subsidiary (3) Guarantee particular list loan from related parties provided by the Company: Hypothecated amount Name of related parties USD HKD RMB Equivalent RMB notes Shenzhen Lionda Bao Shui Trading Co., Ltd. --- --- 8,500,000.00 8,500,000.00 Overdue and was indicted Shenzhen Taiyang Tccp Co., Ltd. 4,500,000.00 --- 6,000,000.00 43,350,000.00 Overdue and was indicted Shenzhen Gaokeda Electronic Co. Ltd. --- --- 500,000.00 500,000.00 Overdue and was indicted 78 Shenzhen Yuda Import & Export Co., Ltd. --- --- 4,800,000.00 4,800,000.00 Overdue and was indicted Shenzhen Paina Garment Co., Ltd. --- --- 1,300,000.00 1,300,000.00 Overdue and was indicted Shenzhen Light Industry Import & Export Co., Ltd. 100,000.00 --- 1,900,000.00 2,730,000.00 Overdue and was indicted Yue-Shen Light Industry & Trading Company --- --- 8,187,837.00 8,187,837.00 Overdue and was indicted Shenzhen Lionda Hunan Branch --- --- 3,250,000.00 3,250,000.00 Overdue and was indicted Shenzhen Lionda Food Industrial Co., Ltd. --- --- 29,400,000.00 29,400,000.00 Overdue and was indicted Shenzhen Lionda Materials Import & Export Co., --- 11,850,000.00 52,980,959.49 65,660,459.49 Overdue and was indicted Ltd. Shenzhen Lionda Electrical Equipment Co., Ltd. --- --- 9,850,000.00 9,850,000.00 Overdue and was indicted Shenzhen Paper Making Company --- --- 17,900,000.00 17,900,000.00 Overdue and was indicted Shenzhen Guangyingda Industrial Co., Ltd. 8,336,160.00 --- 9,780,000.00 78,970,100.00 Overdue and was indicted Shenzhen Lionda Development Co., Ltd. --- 5,900,000.00 3,000,000.00 9,313,000.00 Overdue and was indicted Shenzhen Lionda Leke Suitcase Co. Limited --- --- 12,850,000.00 12,850,000.00 Overdue and was indicted 合计 12,936,160.00 17,750,000.00 170,198,796.49 296,561,396.49 (4) Amounts due from/to related parties Current items Name of related parties Ending balance of the year Beginning balance of the year Other receivables Shenzhen Lionda Materials Import & Export Co., Ltd. 27,935,288.45 27,935,288.45 Shenzhen Lionda Food Industrial Co., Ltd. 4,998,701.51 4,998,701.51 Shenzhen Lionda Development Co., Ltd. 55,362,158.24 56,061,618.96 Shenzhen China Bicycle Company (Holdings) Limited 232,801,657.06 232,801,657.06 Shenzhen Keruite New Materials Co., Ltd. 214,000.00 214,000.00 Shenzhen Taiyang Tccp Co., Ltd. 25,686,735.00 25,686,735.00 Shenzhen Jiadeng Trade Co., Ltd 1,008,500.00 1,008,500.00 Shenzhen Yingte Enterprise Co., Ltd. 477,539.63 477,539.63 Shenzhen Fuguanghao Industrial Co., Ltd. 994,657.43 302,292.62 Total 349,479,237.32 349,486,333.23 Other payables Shenzhen Lionda Group Co., Ltd. 3,955,531.80 6,042,777.49 Shenzhen Lionda Leke Suitcase Co. Limited 1,019,569.00 1,019,569.00 Shenzhen Light Industry Import & Export Co., Ltd. 4,150,000.00 4,150,000.00 Shenxin Enterprise Co., Ltd. 372,569.98 372,569.98 Total 9,497,670.78 11,584,916.47 * The interest of Shenzhen China Bicycle Company (Holdings) Limited held by the Company has been transferred out by end of year, therefore, Shenzhen China Bicycle Company (Holdings) Limited is no longer the related party of the Company. 11 Litigation Events 79 The litigation cases present as follows: A, the credit limits agreement claim between the Company and representative office of China Changcheng Property Management Company, the principal of the agreement is RMB21 million. representative office of China Changcheng Property Management Company has transferred its related right to Huizhou Dayawan Zhuopeng Industrial Co., Ltd. Pursuant to the court’s judgment, the interst held by the Company has been frozen, which include 80% of interest in Shenzhen Lionda Light Textile Chemical Industrial Co., Ltd., 95% of interest in Shenzhen Lionda Electrical Equipment Co., Ltd., 95% of interest in Shenzhen Lionda Development Co., Ltd., 95% of interest in Shenzhen Lionda Materials Import & Export Co., Ltd. and 70% of interest in Shenzhen Lionda Jishi Industry Co., Ltd.. The Company recognized accrued liability accounting to RMB16.79 million for this litigation in prior years. B, the loan agreement controversy between the Company and Shenzhen Branch, China Evergreen Bank, the agreement principal is RMB15 million. Pursuant to the court’s judgment, the Company transferred its 20% of interest in Shenzhen Jianda Machinery Co., Ltd., which is translated into RMB1.29 million, to Shenzhen Branch, China Evergreen Bank, and the loss of RMB1.44 million on long-term investment is recognized as expense account in current year; in addition, the Company’s plants located in 3, 4Floor Hualianfa Building Huaqingbei Road and No.91 Gangnan Road Buji Longgang Distrist was sealed up on Oct.24, 2006. C, the loan agreement dispute between Huaqiaocheng Branch, Bank of Communication (representative office, China Xinda Assets management Co.) and Shenzhen Jinsheng Venture investment Co., Ltd, the agreement principal is RMB2.6 million; the Company has cross default responsibility due to the hypothecation. The Company fully recognized the anticipated liability in prior years. D, loan agreement dispute between the Company and Shenzhen Branch, Bank of China and the latter transferred its related rights to Shenzhen Representative Office, China Xinda Assets Management Company, the agreement principal is HK$32 million, Shezhen Shenbaohua Co., Ltd Shenzhen Shenbao Industrial Co., Ltd. provided the guarantee for the loan. In Dec. 2005, Shenzhen Representative Office, China Xinda Assets Management Company transferred its above related rights to Glenmore Investment Limited. Pursuant to the court’s judgment, the Company must repay the loan principal and related interest, pay the litigation handling fee and preservation fee of RMB387,968 yuan. Shenzhen Shenbao Industrial Co., Ltd. repaid RMB29 million on behalf of the Company, and the Company needed to pay the Guarantor RMB29 million and related interest. E, loan agreement dispute between Shenzhen Guoyin Investment Group Co., Ltd. and Nanshan Sub-branch, Shenzhen Branch, Communication of Bank, the dispute involved three cases, the principals are RMB2 million, RMB3 million and RMB6 million respectively, totaled RMB11 million, the Company provided guarantee for above three loans. ADDVALUE HOLDINGSLIMITED applied to the court to auction the 2640000shares of S*ST Sunrise which security No. is 000030, specific representative domestic representative share, held by Shenzhen Guoyin Investment Group Co., Ltd. F, loan agreement dispute between the Company and Nantou branch, Shenzhen Development Bank, the principal is HK$4 million, Shenzhen Shenbao Industrial Co., Ltd. provided guarantee for this borrowing. The guarantor of Shenzhen Shenbao Industrial Co., Ltd. repaid part of loan principal and 80 interest on behalf of the Company. Pursuant to the court’s judgment, the Company must repay penalty interest of HK$276,100.72 and compound interest of HK$134,125.82 yuan, and the litigation handling fee of RMB3614.5yuan should be paid by the Company. 12. Contingent events The Company provided guarantee for other companies, and the amount for guarantee, overdue guaranteed loan and indicted was USD36,009,760, HK$59,805,200 and RMB502,787,396 yuan respectively. The Company’s overdue loan involved amounts were USD3,729,263, HK$48,109,722 and RMB96,908,000 yuan respectively. 13. Commitment The Company has no significant commitments from balance sheet date to audit report date. 14. Debt Restructuring Events To relieve the guarantee responsibility to Shenzhen China Bicycle Company (Holdings) Limited ( thereafter “Shen Zhonghua”) loan from China Huarong Asset Management Corp., the Company entered into the agreement of “the framework agreement as to release guarantee responsibility of Laiyanda and Shen Zhonghua restructuring event ” and “supplemental agreement”, according to the agreement, the Company would pay RMB110 million and 88million corporate shares of Shen Zhonghua to China Huarong Asset Management Corp., and China Huarong Asset Management Corp. would release the Company’s guarantee responsibility to Shen Zhonghua at amount of RMB917 million debt principal and related interest. China Huarong Asset Management Corp. will be the chief shareholder and take charge of the debt restructuring matter, the Company’s all creditor’s right to Shen Zhonghua will be treated equally with the remained creditor’s right to China Huarong Asset Management Corp. when debt restructure. As at December 31, 2007, the Company paid cash of RMB110 million to China Huarong Asset Management Corp. and transfer A share of totaled 65,098,412 shares and A share of totaled 17,899,664 shares, and B share of 5,001,944 shares was transferred whereas the transfer procedure is in progress. 15. Other significant events The Company’s share reform has not completed as the end of year, as at December, 2006, as approved by Stated-owned Assets Supervision Administrative Committee of Shenzhen Government(Shen Guo Zi Wei Han (2006) No. 385) to Shenzhen Stock Exchange, principally passed the Company’s stock reform; as at Jan. of 2007, the Company’s share reform proposal was approved by shareholders’ meeting. The controlled shareholder of Shenzhen Lionda Group Co., Ltd. held the Company’s 191400k shares and above shares was sealed up by middle court of Shenzhen dated on Apr. 10 of 2007, and this caused the Company was unable to apply for share reform processing plan to Security Registration Company. 81 16. Going concern (1) the concern matters caused to the doubt to the Company’s going concern ability and related improvement measures: As presented in note 7(7) and note 12, the Company is in significant repayment pressure for short-term debt and substantive guarantee debt was indicted, these will affect the Company’s going concern if the Company is not able to release them. As such, the Company entered into financing consultation agreement with Beijing. ZhongheYingtai Management Co., Ltd in Jan. 2007, ZhongheYingtai Management Co., Ltd will design the Company’s restructuring plan, the Company would negotiation with creditor for debt and assets restructuring, and would try to make progress for debt restructuring matter; at the same time, the Company’s controlled shareholder of Shenzhen Lionda Group Co., Ltd. has sought the cooperator to improve the Company’s going concern ability since Dec. 2006 The Company’s management believed that the Company would continue operation after the restructuring, therefore the preparation of financial statements is still based on the going concern principle. (2) due to the uncertainty of the Company’s going concern, this could possibly cause the Company was not able to realize cash for assets repay the debt in ordinary course of business. 17. Return on net assets Return on net assets Profit in report period Fully diluted Weighted average Amount in current year Amount in prior year Amount in current year Amount in prior year Net profit for shareholders of common shares 1.35% (1.15%) 1.36% (0.76%) Net profit for shareholders of common shares 1.49% 1% 1.50% 0.66% after deduction of non-operating losses/profit 18. Earnings per share Earnings per share Profit in report period Basic earnings per share Diluted earnings per share Amount in current year Amount in prior year Amount in current year Amount in prior year Net profit for shareholders of common shares (0.0765) 0.0647 (0.0765) 0.0647 Net profit for shareholders of common shares (0.0845) (0.0563) (0.0845) (0.0563) after deduction of non-operating losses/profit 82 Items Amount in current year Amount in prior year Calculation for basic and diluted earning per share (1) numerator: Net profit after income tax (22,075,217.12) 18,660,262.04 Adjustment: preferred stock dividends and other instruments --- --- Profit/loss for parent company’s common stock shareholders in basic (22,075,217.12) 18,660,262.04 earnings per share calculation Adjustment: diluted potential common stock dividends and related --- --- interest The change of profit or expense generated from the transfer of diluted --- --- potential common stock Profit/loss for common stock shareholders of parent company in diluted (22,075,217.12) 18,660,262.04 earnings per share calculation (2) Denominator: Weighted average for offering common stock in current year in basic 288,420,000.00 288,420,000.00 earnings per share calculation Add: weighted average when all diluted potential common stocks transfer --- --- to common stock Weighted average for currently offering common stock in diluted earnings per 288,420,000.00 288,420,000.00 share calculation. (3) earnings per share Basic earnings per share Net profit for Company’s common stock shareholders (0.0765) 0.0647 Net profit for Company’s common stock shareholders after deduction of (0.0845) (0.0563) non-operating items Diluted earnings per share --- --- Net profit for Company’s common stock shareholders (0.0765) 0.0647 Net profit for Company’s common stock shareholders after deduction of (0.0845) (0.0563) non-operating items 19. Owner’s equity difference adjustment table under former and new accounting principle Originally disclosed amount Items Name of items Disclosed amount in 2007 difference Notes in 2006 Owner’s equity as at Dec. 31 2006 (under former accounting （1,616,318,281.39） （1,616,318,281.39） principle) 1 Variance in long-term investment --- --- Therein: variance in long-term investment generated from --- --- 83 common controlled companies Credit variance generated by using equity method to record --- --- long-term investment 2 The investing real estate prepare to record with fair value module --- --- The currently recognized depreciation for prior years due to the 3 --- --- accrual of assets discard expense Resign compensation which is compliance to the anticipated 4 --- --- liability recognition condition 5 Stock paid --- --- Restructuring liability for anticipated liability compliance with 6 --- --- recognition condition 7 Enterprise combination --- --- Therein: carrying amount of goodwill generated from acquisition --- --- under common controlled company Provision for goodwill impairment according to new accounting --- --- principle Financial assets recognized by fair value and expensed in current 8 --- --- period for variance and financial assets readily for sales Financial liability recognized by fair value and expensed in 9 --- --- current period for variance 10 Increased income from financial instrument split --- --- 11 Derivative financial instrument --- --- 12 Income tax --- --- 13 Minority interest --- --- 14 Special retrospective adjustment for B share and H share --- --- 15 Others --- --- Owner’s equity as at Jan. 1 2007 (under new accounting principle) (1,616,318,281.39) (1,616,318,281.39) 84 20. Beginning balance of owner’s equity adjustment procedure and amendment table under new accounting principle Items Paid-in capital Additional paid-in capital Surplus reserve Un 1, ending balance for prior year 288,420,000 381,059,098.78 138,304,806.89 Add: correction for prior year’s accounting error --- --- --- Change of prior year’s accounting principle 2, beginning balance for current year before adjustment procedure: 288,420,000 381,059,098.78 138,304,806.89 A, write off of variance in long-term investment under common controlled company --- --- --- B, write off of credit balance for long-term investment under equity method --- --- --- C, adjust the difference between carrying amount and fair value for investing real estate --- --- --- D, adjust expense for previously unrecognized fixed asset discard cost and recognize depreciation expense --- --- --- E, adjust payroll payable from resign compensation --- --- --- F, adjust the fair value of recognized liability for stock payment in first vesting date or later --- --- --- G, adjust restructuring liability which is compliance with the recognition condition for anticipated debt. --- --- --- H, retrospective adjust the temporary difference between carrying amount for assets and liabilities and --- --- --- income tax based amount I, write off originally recognized remaining value for goodwill under common controlled company --- --- --- J, goodwill impairment test generated from non-common controlled company --- --- --- K, adjust the difference between carrying amount and fair value for trading financing assets --- --- --- L, adjust the difference between carrying amount and fair value for financing debts --- --- --- M, others --- --- --- 3, the beginning balance after the adjustment 288,420,000 381,059,098.78 138,304,806.89 85 21. Other Significant Matters (1) Adjustment table for difference in net profit during 2006: Items Amount Net profit for 2006 under former accounting principle, including 18,660,262.04 minority interest Add: total of retrospective items --- Therein: no amortization for long-term investment variance --- generated from acquisition under common control Income on variance of fair value --- Income tax provision --- Net profit for 2006 under new accounting principle 18,660,262.04 Reference under the assumption of implementing new accounting principle Add: total from other items’ effect --- Therein: development expense --- Amortization amount for intangible assets for uncertain period --- Pro forma net profit for 2006 18,660,262.04 (2) Adjustment table for consolidated income statement for 2006: Items Before adjustment After adjustment Operating cost --- --- Operating expenses --- --- General and administrative expense (31,337,228.72) 3,309,973.21 Impairment loss on assets --- (34,647,201.93) Profit/loss on variance of fair value --- --- Investment gain 7,234,451.66 7,234,451.66 Non-operating income 360,538.92 360,538.92 Income tax --- --- Net profit 18,660,262.04 18,660,262.04 22. The Approval of Financial Statements The Company’s financial statement was approved by the board of directors’ meeting on Apr.11, 2008. 86 Section XI Documents for Reference The documents for reference were located in the Secretary of the Board Room of the Company, available for inquiring by the CSRC, Shenzhen Stock Exchange and the shareholders of the Company, which included: 1. Accounting statements with personal signatures and seals of legal representative, chief accountant and person in charge of accounting organization. 2. Original of Auditors’ Report with the seals of accountant office and the signatures and seals of certified public accountant. 3. The texts of all the Company’s documents and the original of public notices disclosed publicly in Securities Times and Ta Kung Pao in the report period. 4. Text of Annual Report in 2007 with personal signatures of the Chairman of the Board. Guangdong Sunrise Holding Co., Ltd. Chairman of the Board: Apr. 15, 2008 87