小天鹅Ｂ(200418)2007年年度报告（英文版）

WUXI LITTLE SWAN COMPANY LIMITED ANNUAL REPORT 2007 CONTENTS Section I. Company Profile­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­ ­­­­­­­­­­­­­­­­­­­­­­­­­­­­ Section II. Summary of Accounting Highlight and Bussiness Highlight ­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­ Section III. Changes in Share Capital and particulars about Shareholders­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­ Section IV. Directors, Supervisors, Senior Executives and Employees­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­ ­ Section V. Corporate Governance­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­ ­­­­­­­­­­­­­­­­­­­­­­­­­­ Section VI. Particulars about Shareholders’ General Meetings­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­ Section VII. Report of the Board of Directors­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­ ­­­­­­­­­­­­­­­­­­­­­ Section VIII. Report of the Supervisory Committee­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­ Section IX. Significant Events­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­ ­­­­­­­­­­­­­­­­­­­­­­ Section X. Financial Report­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­ ­­­­­­­­­­­­­­­­­­­­­­­­ Section XI. Documents Available for Documents­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­ 2 Important Notes Board of Directors, Supervisory Committee, Directors, Supervisors and Senior Executives of Wuxi Little Swan Company Limited (hereinafter refereed to as the Company) individually and collectively accept responsibility for the correctness, accuracy and completeness of the contents of this report and confirm that this report does not contain any false or misleading statements or omit any material facts. Jiangsu GongZheng Certified Public Accountants Co., Ltd. produced the unqualified Auditors’ Report for the Company. Mr. Wan Guanqing, Chairman of the Board of the Company, Mr. Chai Xinjian, General Manager of the Company, and Mr. Tang Xingliang, Chief Financial Officer of the Company hereby confirm that the Financial Report enclosed in the Annual Report is true and complete. 3 Section I. Company Profile 1. Legal Name of the Company: In Chinese: 无锡小天鹅股份有限公司 In English: Wuxi Little Swan Company Limited Mr. Wan Guanqing 2. Legal Representative: 3. Secretary of the Board of Directors: Ms. Zhou Sixiu No. 67, Huiqian Road, Wuxi, Jiangsu Contact Address: Post Code: 214035 Tel: 0510­83704003­2360 Fax:： 0510­83720879 E­mail: zhousx@littleswan.com.cn Securities Affairs Representative: Mr. Yao Yanfeng No. 67, Huiqian Road, Wuxi, Jiangsu Contact Address: Post Code: 214035 Tel:： 0510­83704003­2280 Fax: 0510­83720879 E­mail: yaoyf@littleswan.com.cn 4. Registered Address: No.1, Hanjiang Road, National High­Tech Industrial Development Zone, Wuxi Post Code: 214028 No. 67, Huiqian Road, Wuxi, Jiangsu Office Address: Post Code: 214035 International Website of the Company: http://www.littleswan.com E­mail of the Company: info@littleswan.com.cn 5. Designated Newspaper for Disclosing the Securities Times and Ta Kung Pao Information of the Company: Internet Website for publishing the Annual http://www.cninfo.com.cn Report Designated by CSRC: Place Where the Annual Report is Prepared Securities Department of the Company and Placed: Shenzhen Stock Exchange 6. Stock Exchange Listed with: Short Form of the Stock: Little Swan A, Little Swan B Stock Code: 000418, 200418 7. Other Relevant Information of the Company 4 Nov. 29, 1993 Initial registration date: Oct. 20, 2006 Registration date after change: Registration place: Industrial and Commercial Administration Bureau of Wuxi, Jiangsu Registration code of enterprise legal person’s 3202001116330 business license: Registration code of taxation (National Tax): 320200704046760 Registration code of taxation (Local Tax): 320200704046760 Name of Certified Public Accountants engaged by Jiangsu GongZheng Certified Public the Company: Accountants Co., Ltd. Office address of Certified Public Accountants No. 28, Liangxi Road, Wuxi engaged by the Company: 5 Section II. Summary of Accounting Highlight and Business Highlight 1. Major accounting data as of year 2006 Major index Amount ( Unit: RMB Yuan) Operating profit 426,691,046.17 Total profit 418,985,767.25 Net profit attributable to shareholders of listed company 333,393,190.55 Net profit attributable to shareholders of listed company after deducting non­recurring gains and losses 161,937,871.79 Investment income 285,100,198.74 Non­operating income 26,142,858.59 Non­operating expense 33,848,137.51 Net cash flow arising from operation activities 372,922,270.45 Net increase on cash and cash equivalent 161,291,725.18 2. Item and amount of non­recurring gains and losses deducted: Item Amount(Unit: RMB Yuan) 1) Gains and losses on disposal of non­current assets 198,226,494.53 2) Government grant and interest income 9,049,200.32 3) Gains and losses from liabilities reorganization 4,045,700.72 4) Net income/ expense of other operation except said items ­16,701,599.81 5) Welfare expense wrote­off 8,485,260.43 6) Influence on enterprise income tax and minority shareholders ­31,649,737.43 equity 171,455,318.76 Total 2. Item measured by fair value (Unit: RMB Yuan) Item Amount at the perio Amount at the perio Change in current p Amount of influenc 6 e on current d­begin d­end eriod period’s profit Financial assets 9,167,294.72 22,474,658.00 13,307,363.28 19,963,766.08 available for sale Total 9,167,294.72 22,474,658.00 13,307,363.28 19,963,766.08 3. Difference in net profit as audited under PRC GAAP and IFRS: (Unit: RMB Yuan) Item PRC GAAP IFRS Net profit 346,911,201.54 346,911,201.54 Net assets 1,718,490,427.05 1,718,490,427.05 Explanation on the difference II. Major accounting data and financial indexes over the past three years as ended the report period: 1. Major accounting data (Unit: RMB ’0,000) 2006 Increase/ 2005 decrease Item 2007 than last Before After year (%) Before After adjustment adjustment adjustment adjustment Operating income 500,069.17 425,633.79 495,129.54 1.00 326,016.95 326,016.95 Net profit 41,898.58 2,772.77 3,432.53 1120.63 4,235.23 4,235.23 Net profit attributable to shareholders of listed 33,339.32 4,134.51 3,443.07 868.30 4,010.15 4,010.15 company Net profit attributable to shareholders of listed company after deducting 16,193.79 3,590.99 4,634.37 249.43 1,356.61 1,356.61 non­recurring gains and losses Net cash flow arising from 37,292.23 26,734.67 32,072.75 16.27 6,582.91 6,582.91 operation activities 2006 Increase/ 2005 decrease Item 2007 than last Before After Before Before adjustment adjustment year (%) adjustment adjustment Total assets 378,451.62 361,754.60 384,794.83 ­1.65 343,930.12 343,930.12 Owners’ equity 158,291.25 118,706.97 125,392.57 26.24 116,862.29 116,862.29 ( shareholders’ equity) 7 2. Major financial index Unit: RMB Yuan 2006 Increase/ 2005 Item 2007 decrease than Before After last year (%) Before Before adjustment adjustment adjustment adjustment Basic earnings per share 0.91 0.11 0.09 911.11 0.11 0.11 Diluted earnings per 0.91 0.11 0.09 911.11 0.11 0.11 share Basic earnings per share after deducting non­ 0.44 0.1 0.13 238.46 0.1 0.1 recurring gains and losses Fully diluted return on 21.06 3.48 2.75 18.31 3.43 3.43 equity (%) Weighted average return 23.50 3.51 2.84 20.66 3.47 3.47 on equity (%) Fully diluted return on equity after deducting 10.23 3.03 3.70 6.53 1.16 1.16 non­recurring gain and loss (%) Weighted Average return on equity after deducting 11.42 3.05 3.83 7.59 1.17 1.17 non­recurring gain and losses (%) Net cash flow per share 1.02 0.73 0.88 15.91 0.18 0.18 from operating activities At the end of 2006 Increase/ At the end of 2005 At the end Item decrease than of 2007 Before After last year Before After Adjustment Adjustment Adjustment Adjustment Net assets per share attributable to listed 4.34 3.25 3.43 26.53 3.2 3.2 companies’ shareholders III. Changes of shareholders’ equity in the report period (Unit: RMB ’0,000) Foreign Total owners’ equity Capital Retained Items Share capital Surplus reserve exchange attributable to parent reserve profit difference company Amount at the period­begin 36,510.38 67,577.47 11,337.40 10,006.92 ­39.60 125,392.57 Increase in current period 1,230.16 3,617.78 29,036.65 33,884.59 Decrease in current period 931.98 53.93 985.91 Amount at the period­end 36,510.38 67,875.65 14,955.18 39,043.57 ­93.53 158,291.25 Section III. Changes in Share Capital and Particulars about Shareholders I. Change in shares 8 1. Statement of change in shares (Unit: share) Before the change Increase/decrease in this time (+, ­) After the change Item Proportio Capitalization Issuance of Bonus Sub­ Proportio Number n of public Others Number new share shares total n (%) (%) reserve I. Shares subject ­ to moratorium 147,746,592 40.47 ­43,339,644 43,339,644 104,406,948 28.60 1. Shares held by ­ sponsors 92,739,691 25.40 ­3,830,731 3,830,731 88,908,960 24.40 Shares held by domestic legal ­ ­ persons 92,739,691 25.40 3,830,731 3,830,731 88,908,960 24.40 2. Shares held by private placement ­ ­ legal person 55,006,901 15.07 39,508,913 39,508,913 15,497,988 4.20 II. Shares not subject to moratorium 217,357,248 59.53 43,339,644 43,339,644 260,696,892 71.40 1. RMB ordinary shares 90,000,000 24.65 43,339,644 43,339,644 133,339,644 36.50 2. Domestically listed foreign shares 127,357,248 34.88 ­ ­ 127,357,248 34.90 III. Total shares 365,103,840 100.00 ­ ­ 365,103,840 100.00 2. Changes of shares subject to moratorium (Unit: share) Shares Shares subject to subject to Terminated Increase in Conditional Date of Name of shareholder moratorium moratorium in this year this year reason terminating at the year­ at the year­ begin end Continued the Wuxi Guolian Development 87,673,341 87,673,341 commitment of Aug. 7, 2009 (Group) Co., Ltd Note 1 stock reform Jiangsu Little Swan (Group) ­83,510,344 Commitment of 84,745,963 1,235,619 Aug. 7, 2009 Co., Ltd. Note 2 stock reform Xi’an Wanguo Real Estate 4,278,722 4,278,722 Aug. 14, 2007 Development Co., Ltd. Hainan Hewang Industrial 1,797,063 1,797,063 Aug. 14, 2007 Investment Co., Ltd. Hangzhou Industrial & 641,808 641,808 Aug. 14, 2007 Commercial Trust Co., Ltd. Hangzhou Nature Optoelectronic Technology 641,808 641,808 Aug. 14, 2007 Co., Ltd. LIAONING CHENG DA CO., 641,808 641,808 Aug. 14, 2007 LTD. Hangzhou Hi­tech Industry Development General 385,085 385,085 Aug. 14, 2007 Corporation 9 Shenzhen Haoningda Electronic Meter 160,452 160,452 Aug. 14, 2007 Manufacturing Co., Ltd Jiangyin New Idea Electronics Investment Co., 160,452 160,452 Aug. 14, 2007 Ltd. Haiying Enterprise Group Co., 128,362 128,362 Aug. 14, 2007 Ltd. Jiangsu Dong Yu International Construction 128,362 128,362 Aug. 14, 2007 Appraisal Co., Ltd. Beijing Top Electronic Co., 77,017 77,017 Aug. 14, 2007 Ltd. Guangdong Petroleum Labor 64,181 64,181 Aug. 14, 2007 Union Development Co., Ltd. WUHAN ZHONGBAI 64,181 64,181 Aug. 14, 2007 GROUP CO., LTD. GUOLIAN TRUST 864,000 770,170 ­93,830 Aug. 14, 2007 &INVESTMENT CO., LTD. Shenyang Lianya Industrial 2,160,000 1,925,424 ­234,576 Aug. 14, 2007 Development. Corporation Beijing Liancheng. Investment Consultant 1,440,000 1,283,616 ­156,384 Aug. 14, 2007 Company Haerbin Materials Recycling 288,000 256,723 ­31,277 Aug. 14, 2007 Swap Trading Center Jiangsu Youmao Trading Co., 72,000 64,181 ­7,819 Aug. 14, 2007 Ltd. Nanjing Shuren Technology Culture Exploitation 144,000 128,362 ­15,638 Aug. 14, 2007 Company Qingdao Lipai Woodenware 374,400 333,740 ­40,660 Aug. 14, 2007 Co., Ltd. GUANGXI NANNING KANGMAI COMMERCE 72,000 64,181 ­7,819 Aug. 14, 2007 CO.,LTD. Huadong Information 72,000 64,181 ­7,819 Aug. 14, 2007 Newspaper Office Yangzhou Orient Economic 576,000 513,446 ­62,554 Aug. 14, 2007 Trading Co., Ltd. Jiangsu Dafang Industrial & Commercial Development 72,000 64,181 ­7,819 Aug. 14, 2007 Co., Ltd. 10 SHENCHEN HONGKAI 115,200 102,690 ­12,510 Aug. 14, 2007 (GROUP) CO., LTD. China International Tourism 720,000 641,808 ­78,192 Aug. 14, 2007 & Trade Co., Ltd. Beijing International Trust & 144,000 128,362 ­15,638 Aug. 14, 2007 Investment Co., Ltd Jiangsu Electric Power 720,000 641,808 ­78,192 Aug. 14, 2007 Development Co., Ltd Shenzhen Bolite Compound 25,000 22,285 ­2,715 Aug. 14, 2007 Material Co., Ltd. Shenzhen Jintao Information 374,360 333,705 ­40,655 Aug. 14, 2007 Consulting Co., Ltd. DONGHAI SECURITIES 200,300 178,547 ­21,753 Aug. 14, 2007 CO., LTD. HUATAI SECURITIES CO., 288,000 256,723 ­31,277 Aug. 14, 2007 LTD. Wuxi Finance Bureau 16,496,640 14,705,105 ­1,791,535 Aug. 14, 2007 Shanghai Shangtou Investment Management Co., 720,000 641,808 ­78,192 Aug. 14, 2007 Ltd. Dongguan Kangzheng 225,712 201,200 ­24,512 Aug. 14, 2007 Trading Co., Ltd. Dalian Yingzheng Investment 576,000 513,446 ­62,554 Aug. 14, 2007 Management Co., Ltd. Nanjing Sanyuan Chemicals 216,000 192,542 ­23,458 Aug. 14, 2007 Supply & Marketing Co., Ltd SINOPEC YANGZI PETROCHEMICAL CO., 936,000 834,350 ­101,650 Sep. 28, 2007 LTD Dongtai Municipal Enterprise 72,000 64,182 ­7,818 Sep. 28, 2007 Public Asset Trusting Center Zhejiang Yunlong Co., Ltd. 72,000 64,181 ­7,819 Sep. 28, 2007 Wuxi Huadong Family Electric Facility Fitting 72,000 64,181 ­7,819 Sep. 28, 2007 Factory Taizhou Jianghai Bristle 72,000 64,181 ­7,819 Sep. 28, 2007 Products Factory Xuzhou China University of Mining & Technology 360,000 320,904 ­39,096 Sep. 28, 2007 Development General Corporation Shenzhen Danlong Industrial 288,000 256,723 ­31,277 Sep. 28, 2007 Co., Ltd. Changzhou Create Electric 144,000 128,362 ­15,638 Sep. 28, 2007 Appliances Co Ltd 11 Feida Nonferrous Metal Casting Factory in Yangjian 144,000 128,362 ­15,638 Sep. 28, 2007 Town, Xishan District of Wuxi City Wuxi City and Town 7,993,728 7,125,609 ­868,119 Sep. 28, 2007 Industrial United Committee Wuxi Jiahao Electric 72,000 64,181 ­7,819 Sep. 28, 2007 Appliances Factory Shanghai Dongchen Illumination Equipment Co., 288,000 256,723 ­31,277 Sep. 28, 2007 Ltd. China Material Exploitation and Investment Parent 72,000 64,181 ­7,819 Sep. 28, 2007 Company Shenzhen Universe (Group) 468,000 417,175 ­50,825 Sep. 28, 2007 Co., Ltd. Jiangsu Tiansheng 144,000 128,362 ­15,638 Sep. 28, 2007 Pharmaceuticals Co., Ltd. Shenzhen Petrochemical Investment Development 180,000 160,452 ­19,548 Sep. 28, 2007 Co., Ltd. 15,497,988 Other domestic legal persons 15,497,988 Note 3 Total 147,746,592 43,339,644 0 104,406,948 Note 1: On Jun. 29, 2007, the civil ruling with CSZZi (2007) No. 96 and No. 102 from people’s court of Chongan District, Wuxi, Jiangsu Province ordered: 87,673,341 shares (Little Swan A) of Jiangsu Little Swan Group Co., Ltd. transferred to Wuxi Gulian Development (Group) Co., Ltd. for compensating its liabilities. Note 2: In the report period, Jiangsu Little Swan Group Co., Ltd increased 4,162,997 shares through recovering consideration paid in advance, decreased 87,673,341 shares judicially, and then Jiangsu Little Swan Group Co., Ltd decreased 83,510,344 shares in 2007. Note 3: On Aug. 4, 2006, the Company finished the equity division reform. There were 14 shareholders participated the stock reform among all non­trading shareholders, and other 94 shareholders’ consideration of stock reform was paid in advance by former controlling shareholder which was Jiangsu Little Swan Group Co., Ltd. And Jiangsu Little Swan Group Co., Ltd. prepaid 5,846,082 shares in total. In the report period, the Company finished the recovering work for consideration paid in advance of 40 non­trading shareholders and relevant work of terminating shares subject to moratorium to list. Finally, the Company compensated 4,162,997 shares for consideration and terminated 43,339,644 shares subject to moratorium. 3. Issuance and listing of shares 1) Issuing shares in last three years The Company issued neither new shares nor derived securities in the recent three years at the end of the report year. 12 2) Changes of total shares and its structure of the Company There was no change arising from bonus share or share allotment in the report period. 3) Inner employees of the Company (2) There existed no inner employees’ shares in the Company. II. About shareholders 1. Ended Dec. 31, 2007, the Company has totally 35,697 shareholders, including 23,593 ones of A­share and 12,104 ones of B­share. 2. Particulars about shares held by the top ten shareholders and top ten shareholders holding shares not subject to moratorium. Total number of shareholders 35,697 Top ten shareholders Number Proportio Total shares Nature of subject to Number of shares Name of shareholders n to total shares shareholders pledged or frozen shares held moratori um held Wuxi Gulian Development ( Group) Co., State­owned Ltd. legal person 24.01% 87673341 87673341 GREATER CHINA DEVELOPMENT Overseas legal CO., LTD. person 6.37% 23242354 Overseas legal TITONI INVESTMENTS person DEVELOPMENT LTD. 4.93% 18000006 State­owned Finance Bureau of Wuxi legal person 4.03% 14705105 Overseas legal CREDIT SUISSE (HONG KONG) person LIMITED 2.70% 9839967 Domestic legal China Southern Securities Co., Ltd. person 2.07% 7570900 7570900 1094900 Wuxi City and Town Industrial United State­owned Committee legal person 1.74% 6340000 Domestic Zeng Ying natural person 0.87% 3183310 DBS VICKERS (HONG KONG) LTD Overseas legal A/C CLIENTS person 0.78% 2844611 Industrial and Commercial Bank of Domestic legal China­Tianhong selected fixed person Securities Investment Funds 0.74% 2685850 Shares not subject to moratorium held by top ten shareholders Number of shares subject to Name of shareholders Type of shares moratorium held GREATER CHINA DEVELOPMENT CO., LTD. 23242354 Domestically Listed foreign share (B share) TITONI INVESTMENTS DEVELOPMENT LTD. 18000006 Domestically Listed foreign share (B share) 13 Finance Bureau of Wuxi 14705105 RMB ordinary share (A share) CREDIT SUISSE (HONG KONG) LIMITED 9839967 Domestically Listed foreign share (B share) Wuxi City and Town Industrial United Committee 6340000 RMB ordinary share (A share) Zeng Ying 3183310 Domestically Listed foreign share (B share) DBS VICKERS (HONG KONG) LTD A/C CLIENTS 2844611 Domestically Listed foreign share (B share) Industrial And Commercial Bank Of China­Tianhong Selected Fixed Securities RMB ordinary share (A share) Investment Funds 2685850 Industrial And Commercial Bank Of China­Zhonghai Energy Strategy Fixed RMB ordinary share（A share） Securities Investment Funds 2473587 LGT BANK IN LIECHTENSTEIN Domestically Listed foreign share (B share) AKTIENGESELLSCHAFT 2107524 Explanation on associated relationship or It was unknown that whether there was related relationship or action­in­concert among action­in­concert among above mentioned said ten shareholders. shareholders: 3. Introduction about controlling shareholder and actual controller 1) Changes of controlling shareholder and actual controller Name of new controlling shareholder Wuxi Guolian Development (Group) Co., Ltd. Date of changing the controlling shareholder Jul. 2, 2007 Date of publishing information on changing the Jun. 29, 2007 controlling shareholder Newspaper where published the information on Securities Times, Ta Kung Pao changing the controlling shareholder Wuxi State­owned Supervision and Administration Name of new actual controller Commission Date of changing the actual controller Sep. 25, 2006 Date of publishing information on changing actual Oct. 20, 2006 controller Newspaper where published the information on Securities Times, Ta Kung Pao changing the actual controller 2) Basic information of controlling shareholder and actual controller (1) Controlling shareholder: Name of company: Wuxi Guolian Development (Group) Co., Ltd Legal representative: Wang Xilin Date of foundation: Dec. 1997 Registered capital: RMB 128 million Business scope: the company has engaged in capital and asset operation; agency investment, investment consultation and investment service. 14 (2) Actual controller: Name of enterprise: State­owned Assets Supervision and Administration Commission of Wuxi Municipal Government Legal representative: Jiang Guoxiong Registered address: No.8, Xianqian East Street, Wuxi Organization code: 01400796­7 Type of organization: Legal person of government units (3) The property right and controlling relationship among the controlling shareholder, the actual controller of the Company and the Company are as follows: Wuxi State­owned Assets Supervision and Administration Commission 100% Wuxi Guolian Development (Group) Co., Ltd. 100% 89.40% GUOLIAN TRUST & Jiangsu Little Swan NVESTMENT CO.,LTD ( Group) Co., Ltd. 24.01% 0.21% 0.34% Wuxi Little Swan Company Limited (4) Post­balance­sheet­date event On Feb. 26, 2008, the Company’s controlling shareholder Wuxi Guolian Development (Group) Co., Ltd.( Hereinafter refers to as “ Guolian Group”) signed the Share Transfer Agreement with Guangdong Midea Electric Appliances Co., Ltd ( Hereinafter refers to as “ Midea Electric Appliances”, Guolian Group transferred 87,673,341 shares representing 24.01% of shares of the Company to Midea Electric Appliances, which was examined and approved by the State­owned Assets Supervision and Administration Commission of State Council. Currently, the procedure of equity transfer was in progress. 15 Section Iv. Directors, Supervisors, Senior Executives and Employees I. Directors, supervisors and senior executives 1. Basic information： Amount of Whether drawing the Shares payment from the Shares payment from held at Reason Company it the Name Title Sex Age Office term held at the shareholders’ the year­ for change report period year­begin company or other end (Unit: related units RMB’0000) Wan Chairman of the Male 54 2007.03­ 2009.08 0 0 Naught Yes Guanqing Board Director, General Cai Xinjian Male 45 2006.08­ 2009.08 0 0 Naught 100 Manager Mao Director Male 51 2007.03­ 2009.08 0 0 Naught 80 Zhiliang Liang Director Male 52 2006.08­2009.08 0 0 Naught 2 Bingchong Xue Tao Director Male 39 2006.08­2009.08 0 0 Naught 2 Huang Director Male 41 2006.08­2009.08 0 0 Naught 2 Yongxiang Independent Lv Wei Male 45 2006.08­2009.08 0 0 Naught 8 Director Independent Yang Jiahua Male 72 2006.08­ 2009.08 0 0 Naught 8 Director Zhang Independent Male 43 2006.08­ 2009.08 0 0 Naught 8 Aimin Director Chairman of the Chen Supervisory Female 63 2006.08­ 2009.08 0 0 Naught Yes Yanmeng Committee Yu Jingbo Supervisor Male 59 2006.08­ 2009.08 0 0 Naught Yes Ma Jun Supervisor Male 37 2006.08­ 2009.08 0 0 Naught Yes Jiao Deputy General Male 38 2006.08­ 2009.08 0 0 Naught 60 Weimin Manager Deputy General Xu Li Female 37 2007.11­ 2009.08 0 0 Naught 35 Manager Deputy General Li Hong Male 45 2006.08­ 2009.08 0 0 Naught 50 Manager Tang Chief Financial Male 43 2007.01­2009.08 0 0 Naught 40 Xingliang Officer Secretary of the Zhou Sixiu Female 35 2007.01­2009.08 0 0 Naught 20 Board 2. Main work experience or part­time job of present directors, supervisors and senior executives: 1) Wan Guanqing, Chairman of the Board, male, Han nationality. He is a Senior Accountant, and got the Senior Professional Manager qualification of China National Machinery Industry Corporation. Now he has held posts in the Company as Chairman of the Board, and Wuxi Guolian Development (Group) Co., Ltd. as president. Before that he successively served as the Deputy 16 GM and Chief Accountant in Wuxi Compressor Co., Ltd., and Wuxi Power Engineering Co., Ltd.; served as Deputy GM in Wuxi Xinzhongya Investment & Development Co., Ltd., as the GM of investment & management dep. and finance dep. in Wuxi Guolian Development (Group) Co., Ltd., and as the Chairman of the Board in WuXi Huaguang Boiler Co.，Ltd., etc. 2) Chai Xinjian, Director and General Manager, male, Doctor Degree, and now he acts as General Manager of the Company. He ever took the posts of Director of technology center and Standing Deputy General Manager of Wuxi Little Swan Co., Ltd. 3) Mao Zhiliang, Director, male, master degree, and now he acts as Deputy General Manager of Wuxi Little Swan General Electrical Appliance Co., Ltd. He ever took the post of Deputy General Manager of BSW Household Appliances Co., Ltd., Deputy General Manager of Wuxi Little Swan Company Limited. 4) Liang Bingcong is Director, male, MBA. Now, he works in the Investment Managing Company of the Cathay Capital Group, and serves as Director of Investment Project Company with many projects in China joined by Cathay Capital. Before that, he served as Executive Director of Hong Kong Sun Wah Group and CEO of Yingzi Tailai Swire Co., Ltd. 5) Xue Tao, Director, male, Han nationality. He ever took posts of Director of Former China National Household Electric Appliance Research Institute (Now China Appliance Research Institute), professor, senior engineer, who was identified as outstanding distribution expert. Now he works as Director of China Consumer Benefits Protection Fund, senior consultant of China Household Electric Appliance Commercial Association, team leader of expert consultant of China Household Electric Appliance Association, Deputy Executive Director of China Household Electric Appliances Engineering Association, expert consultant of Mun of college graduated, and senior engineer. He holds a post in Wuxi Guolian Development (Group) Co., Ltd. as Senior Project Manager. Before that, he served as Manager of securities investment dep. in Nanjing Qixia Development Co., Ltd., and Deputy GM of Wuxi Qixia Development Co., Ltd. 6) Huang Yongxiang, Director, male, Han nationality. He is an undergraduate and accountant. Now, he serves as Director of Finance Audit Department of Wuxi Industry Assets Management Co., Ltd. Director of finance auditing dep. in Wuxi Light Industrial Asset Management Co., Ltd. 7) Yang Jiahua, Independent Director, male, Han nationality, and bachelor degree, He ever took posts of Director of China Household Electric Appliance Research Institute (Now China Appliance Research Institute), professor, senior engineer, who was identified as outstanding expert by human resource Minster. Now he works as Director of China Consumer Benefits Protection Fund, Senior Consultant of China Household Electric Appliances Research Commercial Institute, team leader of expert term of China Household Electric Appliance Association, Deputy Executive Director of China Household Engineering Association, expert consultant of Beijing Municipal Government. 8) Mr. Lv Wei, Independent Director, male, Han nationality, doctor degree of economic management, and now he is in charge of Vice President of Management Institute of Shanghai Jiao 17 Tong University and Independent Director of Shanghao Yaohua Pikington Glass Co., Ltd. and Giti Tire Co., Ltd. 9) Zhang Aimin, Independent Director, male, Han nationality, professor of accounting, and now he is in charge of Division Chief of Financial Division of East China University of Science and Technology and concurrently Independent Director of Shanghai Sanmao Group Co, Ltd. He ever took the post of Director in Accounting Department, Division Chief of Financial Division of East China University of Science and Technology. 10) Chen Yanmeng, Chairman of the Supervisory Committee, female, Han nationality, bachelor degree, and he is now in charge of Assistant to President in Jiangsu Little Swan Group Co., Ltd.. She ever took the posts of Chief Judge in Nanshan District Court of Wuxi and Presiding Judge of Wuxi Intermediate People’s Court. 11) Yu Jingbo, Supervisor, male, Han nationality, graduated with college diploma. He is economic engineer. Now, he holds the post in Wuxi Little Swan High­Grade Casting Co., Ltd. as GM. Before that, he successively served as Deputy GM of Wuxi Washing Machine Factory, General Manager of Wuxi Little Swan General Electrical Appliance Co., Ltd., Managing Director of Little Swan Midaqi (Malaysia) Co., Ltd., and Deputy GM of Panasonic Home Appliances Refrigerator (Wuxi) Co., Ltd. 12) Ma Jun, Supervisor, male, Han nationality, bachelor degree, and now he is in charge of General Manager of Wuxi Little Swan Small Household Appliances Co., Ltd.. He ever took the post of Manager of Service Department in Wuxi Little Swan Sales Company and General Manager of Jiangsu Little Swan Marketing Co., Ltd. 13) Jiao Weimin, male, bachelor degree. Now he is the deputy GM of the Company. Before that, he serves as Sales Manager in Branch Company in Wuxi Little Swan Co., Ltd., Manger and Marketing Director in North of China district of Jiangsu Little Swan Marketing Co., Ltd., refrigerator sales Director in Jiangsu Little Swan Marketing Co., Ltd., and Deputy GM & GM of Jiangsu Little Swan Marketing Co., Ltd. 14) Xu Li, female, bachelor degree, engineer. Now she works as Deputy General Manager of the Company. Before that, she ever took the posts of Division Chief of draft division of Washing Machine Factory in Wuxi Little Swan Company Limited; Director of Quality Department of Wuxi Little Swan Company Limited; Deputy General Manager of Little Swan General Electrical Appliance Co., Ltd. 15) Mr. Li Hong, male, doctor degree, EMBA, Senior Engineer and now he acts as Deputy General Manager of the Company. He ever took the post of assistant professor of Nanjing University of Science and Technology; Assistant to factory manager and factory manager of washing machine factory, Representative of quality manager, Director of technology center of the Company, Assistant to General Manager in Wuxi Little Swan Company Limited 18 16) Tang Xingliang, male, MBA. He is Senior Accountant, Certified Public Accountants, Certified Tax Agent and International Certified Internal Auditor. Now, he is Chief Financial Officer of the Company. Before that, he successively served as Deputy GM, Manager, the Assistant of GM and Finance Director, Chief Accountant of Directors of Wuxi Taihu Hotel, Chief Accountant of Director, the Chief Accountant and Finance Director, Assistant of GM of Wuxi Grand Hotel Co., Ltd., Director in finance auditing dep. of Wuxi Guolian Textile Group Co., Ltd.. 17) Zhou Sixiu, female, bachelor degree, accountant. Now, she holds a post in the Board of the Company as secretary. She served as Securities Affair Representative, Director of securities investment dep., Deputy Director of GM Office, etc. in Wuxi Qingfeng Stock Co., Ltd. 3. Changes of directors, supervisors and senior executives in the report period 1) Changes of the Directors On Mar. 1, 2007, Mr. Li Shisheng resigned the posts of Director and other posts in the Board of the Company due to work reason. On Mar. 22, 2007, the Company held the 1st Temporary Shareholders’ General Meeting 2007, at which, the Proposal of Electing Mr. Wan Guanqing as Director of the Company, and the Proposal of Changing the Directors of the Company, agreed to sever the Mr. Li Baowei’s post of Director, elected the Mr. Wan Guanqing, Mr. Lei Jianhui as Directors of the Company. On Nov. 21, 2207, Mr. Lei Jianhui resigned the posts of Director and other posts in the Board of the Company due to work reason. On Dec. 14, 2007, the Company held the 6th Temporary Shareholders’ General Meeting 2007, at which, the Proposal of Electing the Directors of the Company, elected Mr. Mao Zhiliang as the Director of the Company. 2) Changes of the Supervisors: None 3) Changes of the Senior Executives On Jan. 10, 2007, the Company held the 5th Meeting of the 5th Board of Directors, the resolutions from the meeting was as follows: (1) As examined and approved the Proposal of the Resignation Submitted by the Chief Financial Officer of the Company and the Proposal of Changing the Chief Financial Officer of the Company, agreed the resignation from Mr. Bian Yanglin, Chief Financial Officer of the Company, agreed to engage Mr. Tang Xingliang as Chief Finance Officer of the Company. (2) As examined and approved the Proposal of Adjusting the Secretary of the Board of Directors of the Company and the Proposal of Changing the Secretary of the Board of Directors of the Company. The Company would not engage Mr. Zu Wei as the Secretary of the Board of Directors of the Company due to the requirement of future development and agreed to engage Ms. Zhou Sixiu as the Secretary of the Board of Directors of the Company. (3) As examined and approved the Proposal of Engaging the Deputy General Manager of the Company, the Company engaged the Mr. Jiao Weimin, Mr. Gao Zheng as Deputy General 19 Manager of the Company in line with daily business demand. Mr. Gao Zheng would not take the post of the Executives Deputy General Manager any more. On Nov. 28, 2007, the 16th Meeting of the 5th Board of Directors was held by the Company, the resolutions from the meeting were as follows: (1) As examined and approved the Proposal of Adjusting the Senior Executives of the Company. The Company engaged Ms. Xu Li as Deputy General Manager of the Company due to work demand. Mr. Mao Zhiliang and Mr. Gao Zheng would not took posts of the Deputy General Manager of the Company any more. II. About employees Type Total number Proportions (%) Production 650 40.70 Technology 108 6.76 Financing 52 3.26 Administration 220 13.78 Sale 482 30.18 Other 85 5.32 Total 1597 100 Among them, 21 persons hold master degree or over; 172 persons hold bachelor degree, 283 persons hold associate degree, 197 persons graduated from secondary specialized school, 288 persons graduated from secondary technical school, 382 persons graduated from senior high school; 254 persons graduated from junior high school or below. 20 Section V. Corporate Governance I. Corporate governance of the Company The Company continuously perfected its corporate governance, set up modern enterprise system and standardized its operation strictly in accordance with the relevant requirements of such laws and regulations as the PRC Company Law, Securities Law and Administrative Rule for Listed Companies. The Company amended the Articles of Association of the Company and made it more standardization and reasonable. In course of the Company’s operation in 2005, the Company standardized its action according to the related laws and regulations related with administration of listed companies, strictly implemented Administrative Rules for Listed Company, actually protected the interests of middle and small shareholders, which accorded with the requirements of normative documents about administration of listed companies promulgated by CSRC. 1. About shareholders and Shareholders’ General Meeting: the Company fully safeguarded equal rights of all shareholders, especially the medium and small shareholders, and ensures all shareholders to exercise practically their rights in accordance with the relevant provisions of such laws and regulations as Articles of Association of the Company and Rule of Procedure of Shareholders’ General Meeting. 2. About Directors and the Board of Directors: the Company elected Directors strictly according to the provisions of the Articles of the Association and Rules of Procedure of the Board, and the numbers and personnel composition of the Board accorded with the requirements of laws and regulations. Every director attended the Board meeting and shareholders’ general meeting seriously and responsibly, attended the relevant training actively, performed their duties trustily, maintained the interests of the Company. The Company had 3 independent directors. 3. About supervisors and the Supervisory Committee: the numbers and personnel composition of the Supervisory Committee of the Company accorded with the requirements of laws and regulations and the Articles of Association of the Company; according to the requirements of Rules of Procedure of the Supervisory Committee, the Supervisory Committee of the Company seriously performed its duties in the desire of being responsible for the shareholders, and made effectively supervision for the Company’s financing and regularity and legality of duties performed by directors, general manager and other senior executives, and expressed independent opinion. 4. About the relationship between the controlling shareholder and listed company: the Company and controlling shareholder implemented “five­separation” in personnel, assets, financing, organization and business; the Board of Directors, the Supervisory Committee and internal organizations can operate independently. 5. About achievements appraisement and encouragement binding mechanism: the Company established the system on allowance of independent directors and directors and compensation of senior executives. The Company would further perfect the overall remuneration system, set up just and transparent achievements appraisement standardization and encouragement binging mechanism for directors, supervisors and senior executives. 6. About relevant interest parties: the Company can respect and protect the legal rights and interests of the bank and other creditors, employees and consumers other relevant interest parties to promote the sustainable and healthy development of the Company together.. 21 7. About information disclosure and transparency: the Company designated secretary of the Board and securities department to be responsible for the information disclosure and reception the visiting and consultation of shareholders; the Company would disclose the relevant information in true, correct, complete and timely further strictly in accordance with the provisions of laws, regulations and the Articles of the Association the Company, ensure all shareholders to understand more information based on equality. The Company set down the management system of investor relationship, and received visiting and telephone consultation of investors with enthusiastic and patient attitude in line with requirements of this system. II. Performance of the Independent Directors The Company perfected the system of independent director in accordance with the requirements of Guideline Opinion on Establishing Independent Director System in Listed Companies. The Company had 3 independent directors at present, taking up one third of total directors of the Board of Directors of the Company. The said three independent directors fulfilled their duties diligently and seriously, attended the Board meetings and the shareholders general meetings held in the report period on time and expressed the independent opinion on such significant events as related transactions. At the Board meetings, independent directors also suggested some reasonable proposals, which play a positive effect for scientific and objective decision made by the Board, maintained the whole interests of the Company and legal rights of all shareholders. 1. Particulars about the independent director attending the Board meetings: Name of Times of Times of Times that should be Independent personal commission Times of absence attend the Board meeting Directors presence presence Yang Jiahua 12 12 0 0 Lu Wei 12 9 3 0 Zhang Aimin 12 11 1 0 2. In the report period, the said three independent directors did not propose the objection on all proposals made by the Board and other significant events of the Company. III. Particulars about the Company’s “five­separation” from the controlling shareholder in respect of personnel, assets, financing, organization and business 1. In respect of personnel, in terms of labor, personnel and salary management, the Company and the controlling shareholder were independent each other, there existed no mixed operation and management between the Company and the controlling shareholder. Such senior executives as General Manager, Deputy General Managers, CFO and Secretary of the Board did not take any post other than Director in Shareholding Companies respectively. 2. In respect of assets, the Company’s assets were complete, and there was the clear property right relationship between the Company and the controlling shareholder. 3. In respect of organization, the Company has set up the organization that was independent from the controlling shareholder completely, the Board of Directors, the Supervisory Committee and internal organization could operate independently. 4. In respect of financing: the Company owned independent financial department, established independent accounting system and financial management system, opened independent bank 22 account, paid tax in line with laws. 5. In respect of business, the Company owned independent and integrated business system and operation capability; was completely separate from the controlling shareholder in business. IV. Self­evaluation of the internal control of the Company: 1. Summary of the internal control of the Company In the report period, in compliance with the requirement of Circular of Concerning Matters on Special Campaign to Strengthen the Corporate Governance of the Company with ZJGSZi[2007] Document No.28 from CSRC and Guidelines on Internal Control of Listed Companies from Shenzhen Stock Exchange, combining with self­inspection and rectification activities of “special campaign of the corporate governance”, focusing on perfecting the internal control of the Company, the Company completely implemented the establishment and improvement of the internal control, carried out the execution and supervision. 1) In the report period, the Company established and revised the Management Rules on Information Disclosure, Rules on Reception and Popularization, Rules on Internal Control, Rules of Procedure of Shareholders’ General Meeting, Rules of Procedure of the Board of Directors, Rules on Independent Directors, Working Rules for General Manager, Working Rules for Secretary of the Board, Implementing Rules for Strategic Committee the Board of Directors, Implementing Rules for Audit Committee of the Board of Directors, Implementing Rules for Remuneration and Examination Committer of the Board of Directors. 2) Against with the comments from investors and the public, the results of in­site inspection on special campaign of the corporate governance, the Company came up with the rectification measure on corporate governance including the internal control of the Company, and began to rectificate in time in line with the relevant requirements. 3) The Company set up the leader team in which elected the Chairman of the Board as team leader, Directors, Supervisors, Senior Executives and Ministers of all departments as principal members, organized to implement the work of internal control of the Company in keeping with the requirements from Rules on Internal Control. 4) The Company set up audit department with 4 auditors, to supervise the implementation of the rules on internal control and put forwards the suggestions and advices to perfect the rules on internal control. 2. Key activities of internal control of the Company 1) Control structure and proportion of the share holding of shareholding subsidiaries 23 98.00 Business Jiangsu Little Swan Marketing Co., Ltd. (RMB 41.95 million) Sale of electrical appliance % 51.00% Business Jiangsu Little Swan Sanjiang Electric Appliance Manufacturing Co., Ltd Manufacture and Sale of electrical (RMB 1.48 million) engineering 61.00% Business Wuxi Feiling Electronics Co., Ltd (USD 3624.60 thousand) Production and sale of computer control 88.46% Business component Wuxi Little Swan Import&Export Co., Ltd( RMB 6.5 million) 主营 Import & Export digital engines 75.00% Business Wuxi Little Swan Huayin Electrical Appliance Co., Ltd (USD 6 million) Production of auto­washing machine 75.00% Business Wuxi Little Swan Sutai Washing Machine Co., Ltd. (USD 6 million) Production of washing and dryer machine 75.00% Business Wuxi Little Swan Cleaning Equipment Co., Ltd.( USD 4 million) Production of dryer equipment Wuxi Little Swan Company Limited 75.00% Business Wuxi Little Swan High­Grade Casting Co., Ltd. (USD 5.8 million) 主营 Production of high­grade casting 70.00% Business Wuxi Little Swan General Electrical Appliance Co., Ltd. (RMB 28million) 主营 Production of tumble washing machines 51.00% Business Little Swan (Jinzhou) Electric Appliance Co., Ltd. (RMB 50 million) Production of refrigerator 57.48% Business Little Swan (Jinzhou) Sanjin Electric Appliance Co., Ltd 主营 Production of twin tub washing machine (RMB 11.07 million) Business 70.00% Wuxi Little Swan Jiangbo Mould Manufacturing Co., LTD Production of mould (RMB 10 million) 90.00% Business Wuxi Little Swan Pottery Co., Ltd (RMB 3 million) Pottery, electric power, semiconductor 90.00% Business Wuxi Little Swan Drive and Control Technology Development Co., Ltd Technology development for drive and (RMB 5 million) control 9 100.00% Business Little Palaima Industry Co., Ltd (USD 1 million) 主营 Sale of appliance and accessories Business 51.00% Midaqi Little Swan Industry Co., Ltd. (USD 1 Million) 主营 Sale of appliance and accessories 100.00% Business Little Swan America Technology Development Company 主营 Technology development (USD 0.50 million) 24 2) Internal control on shareholding subsidiaries of the Company According to the requirement of Guidelines on Internal Control from Shenzhen Stock Exchange, the Company revised the Rules on Internal Control in the report period and strengthened the management for shareholding subsidiaries of the Company in three aspects: (1) Carried out unified management on finance work, all person in charging of the finance in subsidiaries were appointed by the Company; (2) Set up the internal audit department of the Company to audit and supervise the operation of the Company and the shareholding subsidiaries.; (3) enhanced the property management to perfect the legal person governance structure and improve the normative operation of the shareholding subsidiaries. 3) Internal control on related transaction The Company regulated in terms of the principle of related transaction, related person, the related relationship, the procedure of decision­making and procedure of disclosing at length. The Company submitted “ the proposal of annual amount of daily related transaction” to the Board of Directors and shareholders’ general meeting according to operation and development situation every year, the approving procedure examining procedure of all relatd transaction was run strictly in compliance with the requirement of the Articles of Association, Rules of Procedure of Shareholders’ General Meeting. 4) Internal control on external guarantee All external guarantee offered in the report period was provided to subsidiaries of the Company. The Company submitted the Proposal of Accumulative Amount Guarantee provided for Subsidiaries to the Board of Directors and Shareholders’ General Meeting every year according to the operation and development situation of subsidiaries, and guarantee provided for subsidiaries by the Company abided by and implemented the corresponding procedure of approval and authorization. 5) Internal control on use of raised proceeds The Company established and improved the Management Rules on Use of Raised Proceeds which made the definite regulations in terms of the management, use, information disclosure of raised proceeds. In the report period, there existed no use of raised proceeds in the Company. 6) Internal control on significant investment The Company made the definite regulation to limit the examination and approval power of the shareholders’ general meeting and the Board of Directors’ about the significant investment in Articles of Association, set up the relevant rules of procedure, strictly control the entrusting financial management and external investment. In the report period, there existed no significant investment in the Company. 7) Internal control on information disclosure The Company set up and improved the Management Rules on Information Disclosure, the information can be disclosed timely, accurately, completely and fairly in line with Management Rules on Information Disclosure. 25 All said situation didn’t disobey the requirement of Guidelines on Internal Control from Shenzhen Stock Exchange and the Rules on Internal Control of the Company. 3. The problems existing of internal control and rectification plan 1) Dated the end of report period, it was necessary to further improve the internal responsible mechanism among managers and performance appraisal. Rectification Plan: The Company was studying and drafted the internal responsible mechanism among managers and performance examination rules, improved the awareness of diligence through asking the responsibility and performance appraisal. 2) The Company further improved the Management Rules on Information Disclosure. Rectification Plan: the Company would further improve the Management Rules on Information Disclosure in line with the Circular of Concerning Work of Fulfilling the , added the matters on document submission of information disclosure, reporting of significant events, reporting the medium hearsay into Management Rules on Information Disclosure, and which would be carried out after approving by the Board of Directors. 4. General appraisal on internal control situation Through this special activities of corporate governance, the Company discovered certain problems and flaws. Through a series of rectification work, the Company established and perfected the rules on internal control, further perfected the structure of corporate governance. Against with the requirement of Guideline on Internal Control of Listed Companies from CSRC and Shenzhen Stock Exchange, the Company established the control system in aspects of internal environment, the risk reorganization and prevention, control activities, information and communication, inspection and assessment, all of them was in conformity with the requirement on internal control from Shenzhen Stock Exchange. 5. Opinions on self­ evaluation of the Company’ internal control expressed from Supervisors In accordance with the relevant requirements of the Guidelines on Internal Control of Listed Companies, Circular of Fulfilling the Work of Annual Report 2007 of Listed Companies from Shenzhen Stock Exchange, the Supervisors of the Company expressed the independent opinions on self­evaluation of the Company’s internal control: 1) In compliance with the relevant requirement of CSRC and Shenzhen Stock Exchange, the Company abided by the basic principles of internal control, established and improved the rules on internal control in all parts and links of the Company according to the actual situation to ensure that the Company run operation normally. 2) The Company perfected the internal control organization, internal audit department whose personnel was in place now to ensure the implementation and supervision function of the internal control. 26 3) In 2007, there was no situation disobeying the Guidelines of Internal Control of Listed Companies from Shenzhen Stock Exchange and Rules on Internal Control of the Company in the Company. To sum up, the Supervisory Committee believed that the self­evaluation of the Company’s internal control reflected the actual situation of internal control of the Company completely, truly and accurately. 6. Opinions on self­ evaluation of the Company’ internal control expressed from Independent Directors In the report period, the Company revised and approve a series of management rules like Rules on Internal Control in line with the Guidelines on Internal Control of Listed Companies from Shenzhen Stock Exchange. The key activities of internal control of the Company operated according to all rules on internal control of the Company, special rules were set up in terms of management on subsidiaries, related transaction, external guarantee, use of raised proceeds, significant investment, information disclosure of internal control to ensure all operation and management of the Company operated normally. IV. Performance valuation and encouragement mechanism for senior executives The selection, appraisement and encouragement of the senior executives of the Company were implemented according to the relevant regulations of the Company Law and the Articles of the Association. The Company established comprehensive management system based on KPI, continued to perfect the annual compensation closely linked the Company’s operating achievements, which Remuneration Committee proposed and the Board of Directors decided, effectively improved responsibility and work enthusiasm of the whole senior executives. Section VI Brief introduction to Shareholders’ General Meeting In the report period, the Company held totally seven shareholders’ general meetings in No. 208 meeting room. The details are as follows: Ⅰ. Annual Shareholders’ Meeting 2006 was hold. Resolution of the meeting was published in Securities Times and Ta Kong Pao (HK) on 11 May 2007. Ⅱ. The 1st Special Shareholders’ Meeting 2007 was held. Resolution of the meeting was published in Securities Times and Ta Kong Pao (HK) on 23 Mar. 2007. Ⅲ. The 2nd Special Shareholders’ Meeting 2007 was held. Resolution of the meeting was published in Securities Times and Ta Kong Pao (HK) on 10 Apr. 2007. Ⅳ. The 3rd Special Shareholders’ Meeting 2007 was held. Resolution of the meeting was published in Securities Times and Ta Kong Pao (HK) on 31 Aug. 2007. Ⅴ. The 4th Special Shareholders’ Meeting 2007 was held. Resolution of the meeting was published in Securities Times and Ta Kong Pao (HK) on 6 Sep. 2007. Ⅵ The 5th Special Shareholders’ Meeting 2007 was held. Resolution of the meeting was published in Securities Times and Ta Kong Pao (HK) on 26 Oct. 2007. 27 ⅦThe 6th Special Shareholders’ Meeting 2007 was held. Resolution of the meeting was published in Securities Times and Ta Kong Pao (HK) on 7 Dec. 2007. Section VII Report of the Board of Directors Ⅰ. Retrospect on operation of the Company in the report period 1. Particulars about general operation in the report period In 2007, global white household electrical appliance increased stably and continuously. Including upgrade of products was one of driving factors of increment. Meanwhile, under the pressure of raising price of raw material and depreciation of USD and restriction of energy saving and standards on environmental protection, operating cost of the Company was increased. In 2007, price of major nonferrous metals used in manufacturing household electrical appliance still fluctuate in high position, price of stainless steel and plastic granule increased by 10% and 5% respectively compared with the last period, which increased direct cost of material. Data from National Bureau of Statistics of China indicated that, accumulative annual value of the domestic household electrical appliance industry in China in 2007 amounted RMB 60.53 billion, 26.05% up compared with the last period. Accumulative sales value of household electrical appliance industry in 2007 amounted RMB 59,53 billion, 13.21% up compared with the last period. Output of washer machine in domestic in 2007 amounted 38,560,000, 13.21% up compared with the last period; output of refrigerator amounted 43,970,000, 22.24% up compared with the last period; output of ice locker amounted 11,870,000, 39.16% up compared with the last period. Export of washer machine amounted 13,400,000, 17.6% up compared with the last period; export value of washing machine amounted RMB1504 million, 22.5% up compared with the last period. Exchange rate of USD to RMB decreased by 7.29 at the end of the year 2007 from 7.79 at the beginning of the year, which brought pressure to price of export products and cause loss from exchange. In 2007, focusing on the target of “standing on washing and strengthening core business”, the Company actualized the guidelines of “Taking benefit as the core, integrating resources, rectifying management and improving overall running quality ”, overcame difficulties, struggled for stronger, the whole running quality improved and the brand value and operation profit increased by a large margin. In 2007, the Company strengthened integration of main business in accordance with the target of “standing on washing”, acquired parts of shares of Little Swan (Jingzhou) Electrical Appliances and Ningbo Xinle Household Appliances and enlarged the business of washing machine; established joint­venture enterprise with GE of America, and deepened strategic cooperation; acquired and merged foreign shareholdings of Changzhou Sutai Electrical Appliance Co., Ltd Wuxi FILIN Electronics Co., Ltd, transferred shareholdings of Panasonic Refrigeration Devices Co., Ltd, Panasonic Cold Press Machine Co., Ltd and Wuxi Lifanda Electrical Appliances Co., Ltd, and historical problem was solved. The origination structure optimized, set plan operating Department, tendering & biding Office, impeller washing machine factory, tumble washing machine factory, industrial washing machine factory and marketing system managed by the Company directly. The Company implemented management model of integration of finance, the financial chief of the subsidiary company implemented appointment system, which enhanced control ability of the parent company, improved efficiency of fund utilization, reduced the loan of bank. The Company liquidated assets, reduced the area of storage, and activated assets by assets liquidation & check and disposal of damaged machines. The Company actualized public invitation of biding system 28 on various purchase, introduced into new suppliers, strengthened supply chain, and counteracted the raising cost caused by price increment of raw materials. The Company insisted on “Facing to consumer, self innovation”, and contributed to research & development RMB 50 million, completed 65 new developed projects, applied 26 patents, broke through in aspects of environmental protection, energy saving and self­innovation, and frequency conversion mist­form water tile washing machine passed the first certificate in the National Top Energy Efficiency. Marketing revenue and profit of new products reached 30% above. In Grand Ceremony of Innovation of the country in 2007, the new tumble washing machine won the best Design Award of self­innovation, the new impeller washing machine was awarded The Best design of function innovation, and the design team of the Company honored to Award of the Best Design Team. Facing the complex available competition environment of the market, the Company further strengthened fundament management, especially management of invested companies, and continuously improved marketing system and service system; further strengthened adjustment of organization structure and setting up of performance appraisal system, continuously perfected excitation mechanism, created cultural atmosphere which was propitious to self­innovation, self­ perfect and consecutive and stable increase of achievements; further adopted effective measures to protect and avoid operating risk, and continuously enhanced management and upgrade of brand. 2. Scope of main business and operation situation The main business of the Company is production and sales of household electric appliance and accessories and fittings etc. and technology service. In report period, the Company realized operating revenue amounting to RMB 5,000,690,000 as well as profit from main operation amounting to RMB 426,690,000. 1) Statement of main operations classified according to industries Unit: RMB’0000 Main operations classified according to industries Increase or decrease of Increase or decrease Increase or decrease Classified according Operating Gross profit operating revenue of operating cost of gross profit ratio Operating cost to industries revenue ratio (%) compared with the last compared with the compared with the year (%) last year (%) last year (%) Manufacture of daily 462,882.74 367,977.87 20.50 0.30 0.82 ­0.41 electric appliances Manufacture of 18,416.96 17,155.21 6.85 21.03 17.18 3.06 casting Other industries 18,769.46 15,347.55 18.23 1.92 8.48 ­4.95 Main operations classified according to products Washing machine 326,326.42 255,828.64 21.60 2.00 1.98 ­0.10 Electric engines 17,441.53 15,312.91 12.20 31.00 18.47 9.28 Refrigerators 119,114.80 96,836.31 18.70 ­7.00 ­4.32 ­2.08 Casting 18,416.96 17,155.21 6.85 21.00 17.18 3.06 Other 18,769.46 15,347.55 18.23 2.00 8.48 ­4.95 2) Statement of main operations classified according to areas Unit: RMB’0000 Operating revenue Increase/decrease of operating revenue over the last year (%) Areas Domestic 372,119.85 3.26 Overseas 127,949.32 ­5.06 3) Main suppliers and customers 29 Unit: RMB’0000 Total amount of purchase of the top 41,845.58 Proportion in the total 3.26 five suppliers amount of purchase Total amount of sales of the top 105,145.64 Proportion in the total ­5.06 five sales customers amount of sales 3. Changes in assets structure of the Company in the report period: Proportion in total assets at the Proportion in total assets at Increase or decrease Assets structure end of 2007（%） the end of 2006（%） year­on­year（%） Accounts receivable 12.34 14.56 ­2.21 Inventories 17.19 21.12 ­3.94 Long­term equity investment 6.73 6.76 ­0.03 Fixed assets 14.33 15.40 ­1.07 Projects in construction 0.90 0.65 0.25 Short­term loan 5.03 15.05 ­10.02 Explanation on reason for changes: Accounts receivable decreased 2.21% year­on­year mainly because the Company strengthened fund return in 2007, and the receivable account of Wuxi FILIN Electronics Co., Ltd and Wuxi Little Swan Import & Export Co., Ltd decreased by a large margin compared year­on­year. Inventory amount decreased RMB 162,450,000, 3.94% down compared with year­on­year, which mainly because Jiangsu Little Swan Marketing Co., Ltd cleaned up stocked washing machines in 2007, accelerated inventory turnover, decreased inventory by a large margin. Inventories of washing machines decreased RMB 127,000,000 year­ on­year, and inventories of refrigerators decreased RMB 388,800,00, 10.02% down year­on­year, which mainly because Wuxi Little Swan Co., Ltd strengthened efficiency of fund utilization, paid back all the short­term loan RMB 308,000,000 and Wuxi Little Swan Import & Export Co., Ltd also paid back the short­term loan RMB 70,000,000 4. Changes in expense structure of the Company in the report period in the report period: Proportion in total assets at the Proportion in total assets at the Increase or decrease year­ Expense structure end of 2006（%） end of 2005（%） on­year（%） Operating expense 15.67 16.90 ­1.23 Administrative expense 4.42 5.04 ­0.62 Financial expense 1.36 1.45 ­0.08 Income tax 1.90 0.09 1.81 Explanation on reason for changes: The expenses of income tax increased as the profit ability of the Company was gradually strengthened. 5. The change of cash flow of the Company in the report period: (RMB’0000) Increase/decrease Margin of increase or Indexes Y 2007 Y 2006 year­on­year decrease year­on­year（%） Net cash flow arising from 372,922,270.45 320,727,479.21 52,194,791.24 16.27 operating activities 30 Net cash flow arising from 253,687,179.58 ­230,010,553.53 483,697,733.11 210.29 investing activities Net cash flow arising from ­458,277,493.05 ­145,371,616.14 ­312,905,876.91 ­215.25 financing activities Net increase of cash and cash 161,291,725.18 ­65,971,974.16 227,263,699.34 344.49 equivalent Explanation on reason for changes: the net cash flows arising from operating activities increased mainly because notes receivable of the current period decreased; investing activities increased 480 million compared with year­on­year, mainly because purchased land and workshop of Little Swan Group with RMB 154 million shareholdings of Little Swan (Jingzhou) Electrical Appliances with RMB77 million in the last year, and cash inflow arising from sales of shareholdings of Panasonic RMB 154 million and shareholdings of GM brand RMB 51 million, the profit of GM brand was RMB 4 million; the net cash flow arising from financing activities decreased by large margin because of the return of bank loans of RMB 3.89 million. 6. Operation and analyses on the business performance of the main controlling companies (1) Operation of the Company’s main wholly­funded affiliated enterprises and controlling subsidiaries Wuxi Little Swan High­Grade Casting Co., Ltd: A company of limited liability and the Company’s controlling subsidiary; the registered capital totaling USD 5.8 million; main businesses being the manufacture and sales of precision iron castings, specially the iron castings for refrigeration compressors and automobiles; its sales income in 2007 totaling RMB 184,169,600, net profit RMB ­1,333,300 and the total assets RMB 117,364,100. Wuxi FILIN Electronics Co., Ltd: A company of limited liability and the Company’s controlling subsidiary; the registered capital totaling USD 3,624,564; main businesses being the development of software products as well as the development and manufacture of new electronic components, etc; its sales income realized in 2007 totaling RMB 240,956,200, net profit RMB 13,724,000 and the total assets RMB 201,025,100. Jiangsu Little Swan Sanjiang Electric Appliance Co., Ltd: A company of limited liability and the Company’s controlling subsidiary; the registered capital totaling RMB 14.8 million; main businesses being the sales of hardware, components and parts of household electric appliances, etc; its sales income realized in 2007 being RMB 174,079,000, net profit RMB 1,331,100 and the total assets RMB 266,546,900. Wuxi Little Swan Huayin Electrical Appliance Co., Ltd: A Sino­foreign joint­venture company and the Company’s controlling subsidiary; the registered capital totaling RMB 49,673,400; its main businesses being the manufacture and sales of electric machineries; its sales income in 2007 totaling RMB 167,544,700, its net profit RMB 4,472,000 and the total assets RMB 105,019,800. Jiangsu Little Swan Marketing Co., Ltd: A company of limited liability and the Company’s controlling subsidiary; the registered capital totaling RMB 419,500,000; its main businesses being the sales of hardware, components and parts of household electric appliances, etc; its sales income realized in 2007 being RMB2,629,989,600, its profit RMB 1,894,800 and its total assets RMB 548,542,100. Wuxi Little Swan Import & Export Co., Ltd: A company of limited liability and the Company’s 31 controlling subsidiary; the registered capital totaling RMB 65,000,000; its main business being the sales of exported household electric appliances, etc; its sales income realized in 2007 totaling RMB 620,166,800, its net profit RMB 10,910,100 and its total assets RMB 211,007,500. Wuxi Little Swan General Electrical Appliances Co., Ltd: A company of limited liability and the Company’s controlling subsidiary; the registered capital totaling RMB 28,000,000; its main business being research & development, manufacture and sales of manufacture and sales of washing machines and dry­cleaning machines, dishwasher, etc; its sales income realized in 2007 totaling RMB 659,326,400, its net profit RMB 40,017,400 and its total assets RMB 166,313,600. Little Swan (Jingzhou) Electric Appliance Co., Ltd: A company of limited liability and the Company’s controlling subsidiary; the registered capital totaling RMB 50,000,000; its main business being manufacture and sale of refrigerator, cold storage, a series of refrigeration products and electrical product; its sales income realized in 2007 totaling RMB 620,025,500, its net profit RMB 16,162,000 and its total assets RMB 363,931,300. 2) The net profits of the following shareholding companies had influenced over 10 percent of the Company’s net profit in the report period: BSW Household Appliances Co., Ltd: A company of limited liability and the Company holding its 40 percent equity; its registered capital totaling USD 29,275,000; its main businesses being the production and sales of washing machines, washer­driers, dish washers, as well as the electric kitchenware and their components and parts, mainly modular kitchen utensils, modular kitchen range, disinfection cabinet, and extractors; its sales income realized in 2007 being RMB 1,275,824,800, the profit from main businesses totaling RMB238,746,900, the net profit made being RMB 136,191,100 and its total assets totaling RMB690,629,100. ⅡOutlook of future development of the Company 1. Development trend of the industry of the Company and challenges and opportunities It is forecasted that, the global demand of white electric appliances in 2008 would increase stably, domestic market of washing machine would keep stable development under the improvement of upgrade and increment of rural market, export of washing machine would keep stable increase and there still be a vast high­ended market. Meanwhile, many uncertain factor which influenced the global economic would increase. The risks and pressure from increased price of raw material, raise of transaction cost, change of exchange rate and non­customer barrier would exist. 2. Operating development plan in the new year In 2008, the Company would catch opportunity of change of shareholdings, optimize combined resource, realize synergy, strengthen fundamental management, perfect organization of excitation mechanism, stabilize strategic cooperation, stabilize core talent, give prominence to standing on washing, stabilize and prompt core technology and strengthen core business of washing machine. 1) strengthen fundamental management, and focus on improvement of operating quality and efficiency Based on management of intergradation marketing and research & development of production, focus on the marketing target and control of cost, perform inner management and assessment system strictly, strictly abide by the systems of financial control, strengthen inner audit, 32 strengthen the pertinence and effect of audit, strengthen standard of marketing effectively, control reasonable marketing expenses and avoid risk of marketing effectively. Actualize 100 percent back of retail and after­sale service, and improve quality of service and efficiency of retail. Catch opportunity of upgrade of products, perfect production line and improve marketing proportion of Tumble Washing Machine. Catch the opportunity of policy of pushing household appliances to rural market, and expand the third and fourth market. Catch the opportunity of saving energy and reducing emission, and research &develop products of energy saving and environmental protection. Catch the opportunity of Olympic Games in Beijing, and prompt brand image. 2) Insist on self­innovation, and push saving cost and increase of profit Increase the investment of high­ended products, and focus on research & development of high­ ended tumble washing machine and fully automatic washing machine with large capacity. Strictly assess consumption of raw material in accordance with standard of technical quota, strengthen management of energy consumption, and eliminate energy waste. Implement real­time monitor­ control of logistics and warehouse; in accordance with the "principle of “First in, first out” to control storage, improve the logistic efficiency, prompt turnover of inventories, reduce proportion of stickers and damaged machines, and reduce cost of transportation. Break through in improvement of service quality to reform and regularize service team. 3) Optimize origination structure, change mechanism and integrate advantages Continually pushed adjustment of origination structure, strengthen management of invested enterprises, strictly perform assessment in accordance with responsibilities, and set assessment system guided with target. Strengthen brand maintenance and accelerate brand upgrade by cooperation with the Chinese national fencing team and opportunities brought by Olympics Games. Ⅲ Changes of accounting policies and accounting estimates and correction of significant accounting error. The Company adhered to Accounting Standard for Business Enterprises and successor regulations of 2006 issued by Ministry of Finance since 1 Jan. 2007 and made reconciliation statement of shareholder’s equity of 2007. According to the explanation on successor regulations of Accounting Standard for Business Enterprises, the Company rechecked and adjusted the relevant, liabilities and book balance of owner’ s equity as of 1 Jan. 2007, the details referred to accounting policies and accounting estimates and influence on correction of significant accounting error in Note 2, 23 of financial statement. IV Investments of the Company 1. Use of raised proceeds The raised proceeds of the Company have been used up. In the report period, the Company had no proceeds raised through share offering or the application of proceeds raised through previous share offering continued to the report period. 2. Use of non­raised proceeds In the report period, the real investment of the Company was RMB 50,567,600. Including significant project of investment as follows: 1) The Company acquired and merged 32% of equity of Ningbo Xinle Household Appliances 33 which was held by Jiangsu Little Swan Group Co., Ltd, with RMB 31,233,800, accounting for 32% equity of the Ningbo Xinle Household Appliances. 2) The Company acquired and merged Jiangsu Little Swan Group Co., Ltd and parts of Jiangsu Little Swan Sanjiang Electric Appliance Co., Ltd, taking up 35% and 22.482% equity respectively, with RMB15,403,800, accounting for 57.482%. 3) The Company acquired and merged 10% equity of Wuxi FILIN Electronics Co., Ltd, which was held by Kongque Household appliances Co., Ltd, with RMB 3,930,000, shareholding proportion raise from 51% to 61%. Ⅴ Auditing opinions given by the Certified Public Accountants The Company engaged Shulun Pan Certified Public Accountants had provided unqualified Auditors’ Reports for the Annual Report 2007 of the Company. Ⅵ Routine work of the Board 1. Meetings of the Board of Directors and the resolutions in the report period The Board of the Directors of the Company held 16 meetings in the report period, from the 5th meeting of the 5th session to the 16th meeting of the 5th session. The details were as follows: 1) The 5th meeting of the 5th Board of Directors was held on­site, the resolutions of the meeting were published in Securities Times and Hong Kong Ta Kung Pao dated 12 Jan. 2007. 2) The 6th meeting of the 5th Board of Directors was held by way of telecommunication, the resolutions of the meeting were published in Securities Times and Hong Kong Ta Kung Pao dated 7 Mar. 2007. 3) The 7th meeting of the 5th Board of Directors was held on­site, the resolutions of the meeting were published in Securities Times and Hong Kong Ta Kung Pao dated 23Mar. 2007. 4) The 8th meeting of the 5th Board of Directors was held on­site, the resolutions of the meeting were published in Securities Times and Hong Kong Ta Kung Pao dated 18 Apr. 2007. 5) The 9th meeting of the 5th Board of Directors was held by way of telecommunication, the resolutions of the meeting were published in Securities Times and Hong Kong Ta Kung Pao dated 25 Apr. 2007. 6) The 10th meeting of the 5th Board of Directors was held by way of telecommunication, the resolutions of the meeting were published in Securities Times and Hong Kong Ta Kung Pao dated 28 Jun. 2007 7) The 11th meeting of the 5th Board of Directors was held by way of telecommunication, the resolutions of the meeting were published in Securities Times and Hong Kong Ta Kung Pao dated 14 Aug. 2007. 8) The 12th meeting of the 5th Board of Directors was held on­site telecommunication, the resolutions of the meeting were published in Securities Times and Hong Kong Ta Kung Pao dated 18 Aug. 2007. 9) The 13th meeting of the 5th Board of Directors was held by way of telecommunication, the resolutions of the meeting were published in Securities Times and Hong Kong Ta Kung Pao dated 10 Oct. 2007. 10) The 14th meeting of the 5th Board of Directors was held on­site, the resolutions of the meeting were published in Securities Times and Hong Kong Ta Kung Pao dated 26 Oct. 2007. 34 11) The 15th meeting of the 5th Board of Directors was held by way of telecommunication, the resolutions of the meeting were published in Securities Times and Hong Kong Ta Kung Pao dated 3 Nov. 2007. 12) The 16th meeting of the 5th Board of Directors was held by way of telecommunication, the resolutions of the meeting were published in Securities Times and Hong Kong Ta Kung Pao dated 29 Nov. 2007. 2. Implementation of the resolutions made at the Shareholders’ General Meetings In the report period, the Board of Directors of the Company had carefully implemented various resolutions made at the Shareholders’ General Meetings and accomplished all the work assigned by the Shareholders’ General Meeting. According to the dividend plan of 2006 reviewed and approved by Shareholders’ General Meeting of 2006, the Company actualized the dividend plan on 21 Jun. 2006, distributing cash dividends at the rate of RMB 0.15 for every 10 shares. 3. Performance of Audit Committee of the Board of Directors The Audit Committee of the Board of Directors was composed of three independent directors, including the major commissioner acted by professional accountants. In accordance with relevant provisions stipulated in China Securities Regulatory Commission and Shenzhen Stock Exchange, Rules for procedure of Audit Committee of the Board of Directors, Work System of annual report of the Independent Directors, Procedure of annual report of the Audit Committee of the Board of Directors, the Audit Committee of the Board of Directors based on the principle of diligent, fulfill their duties, and perform the following responsibility: 1) Checked and approved audit plan of 2007 and relevant information, negotiated and confirmed the arrangement of date of audit on financial report of the Company in 2007 with Shulun Pan Certified Public Accountants: The Audit Committee of the Board of Directors checked and approved Audit Report Plan in 2007, which was submitted by Finance Department of the Company on 23 Dec. 2007, fully communicated with person in charge of Shulun Pan Certified Public Accountants reached agreement on the aforesaid audit plan on 25 Dec.2007, which considered that the plan was made carefully and born responsibility personally, and effectively guarantee the successful development of the audit of 2007. 2) Checked and approved financial statement which was primarily made by the Company and issued opinions in written on before the audit certified public accountants began their work: The Audit Committee of the Company checked and approved the financial statement submitted by Finance Department of the Company on 18 Jan. 2008, including capital balance as of 31 Dec. 2007, profit statement of 2007, reconciliation statement of Shareholder’s equity, cash flow statement and parts of notes of financial statement. By consulting relevant finance staff and manager, examined meeting minutes of Shareholders’ Meeting, the Board of Supervisors, the Board of Directors and relevant committees, relevant account book and account statement of the Company and analyzed on significant financial date, the audit committee of the Company considered that: a) The data of financial accounting statement, which was made by the Company, faithfully reflected assets and liability as for 31 Dec. 2007 and operating results in 2007. The operating achievements increased by a large margin compared with that of 2006. b) Approved that financial audit of 2007 based on the financial statement, noticed the 35 Company made the relevant financial statement strictly according with New Accounting Standards for Business Enterprise to guarantee the correctness, accuracy and completeness of the finance statement. 3) The Audit Committee of the Board of Directors communicated with the certified public accountants of the Company on problems found in procedure of audit, submission date of audit report after the certified public accountants of the Company 4) After the certified public accountants issued opinion on the primary audit, the Audit Committee of the Board of Directors and certified public accountants examined and approved the financial statement of the Company in 2007, and formed written opinion: The Audit Committee of the Company examined and approved the statement which was submitted by Finance Department of the Company on 15 Mar. 2008 and issued primary opinions, including balance sheet on 31 Dec. 2007, profit statement of 2007, reconciliation statement of shareholders’ equity, cash flow statement and note to the financial statement. The Audit Committee of the Company considered that: (1) The relevant data in financial statement of the Company in 2007 faithfully reflected assets liabilities of the Company up to 31 Dec. 2007 and operating results in 2007. (2) Approved that made annual report 2007 and summary of annual report of the Company based on the financial statement, which was submitted to meeting of the Board of Directors for approval after examination and approval of the audit committee. Meanwhile, required the accountants completed the audit as soon as possible according to the general audit plan to guarantee the annual report 2007 was disclosed as scheduled. 5) After Shulun Pan Certified Public Accountants issued audit report 2007, the Audit Committee of the Board of Directors held a meeting, and summarized the annual audit of Shulun Pan Certified Public Accountants: (1) Summary report on audit of 2007 of the Audit Committee of the Board of Directors The audit committee of the Company examined and approved Audit Plan of 2007 submitted by finance department of the Company on 23 Dec. 2007, and communicated with person in charge of the project of Shulun Pan Certified Public Accountants on the aforesaid audit plan, and reached agreement that the plan was made carefully and born responsibility personally, and effectively guarantee the successful completeness of the audit of 2007. There are 15 persons (including person in charge of the project) of Shulun Pan Certified Public Accountants engaged in audit in succession on 13 Jan. 2008 and 27 Feb. 2008. Including, the 15 auditors completed audit of companies which were in range of the consolidated statement on 5 Mar. 2008. Person in charge of the project communicated with committers of the Audit Committee and the Company on consolidation of statement, adjustment items on accounting, application of accounting policy and accounting work to be perfected, which made the committer knew further about the operating situation and application of New Accounting Standard of Business Enterprise and offer mature estimation on for fair audit conclusion issued by certified public accountants. During the period of audit on­site, the Audit Committee focused on problems in procedure of audit, and discussed the following points by the way of telephone and meet: a. whether all the transaction was recorded or not, whether transaction items were true, and whether the information was completed; b. whether the statement made in accordance with New Accounting Standard for Enterprise and requirements of securities regulatory department and regulations in financial 36 system of the Company; c. whether the check of the Company be actualized successfully, whether the check conclusion fully reflected quality of assets; d. particulars about laws and regulations, other exterior requirements, management policy and indications and other inner requirements; e. whether system of the inner accounting control was perfect or not; f. whether the departments of the Company cooperated to get full and suitable evidence for certified public accountants. The annual certified public accountants actively affirmed the above problems and issued unqualified standard opinion on audit report on 4 Apr. 2008. The Audit Committee is of the view that the Certified Public Accountants conducted their annual review in accordance with the China’s Independent Auditing Standard with enough auditing time, reasonable arrangement of auditing personnel and professional ability, also the financial statement issued can present fully the financial position of the Company as at 31 December 2007, and the results of operations and the cash flows of the Company for the year then ended, which the audit conclusion comply with the real situation of the Company. (2) Particular about meetings held by the Audit Committee of the Board of Director of Wuxi Little Swan Co., Ltd. On the morning of 3 Apr. 2008, the meeting of Audit Committee of the Board of Directors was held at the Meeting Room 208 of the Company. Three commissioners should attend this meeting and all of them present at the meeting. All commissioners of the Audit Committee unanimously agreed on the following resolutions by means of voting ways of signature. Resolution I. Examined and approved Financial Settlement Report 2007; Resolution II. Examined and approved Annual Report 2007 and Summary; Resolution III. Examined and approved Summary Report for Auditing Working for 2007 of the Audit Committee of the Board of Directors Resolution IV. Examined and approved Proposal on Engagement of Certified Public Accountants. 4. Duty performance of Compensation and Appraisal Committee The Compensation and Appraisal Committee of the 5th Board of Directors consists of three directors, of which the Chairman is an Independent Director. During the report period, the Compensation and Appraisal Committee of the Board of Directors made appraisal to directors, supervisors and senior management in accordance with operation position and the results of operations for the year of 2007 and based on standard and procedures for performance appraisal, and convened the meeting to examine and approve the proposal on paying compensation for 2007 to senior management, which was submitted to the Board of Director for examination. VII. Draft proposal for profit distribution and transfer capital to stocks of 2007 As per Auditors’ Report issued by Jiangsu Gongzheng Certified Public Accountants Co., Ltd., the Company (consolidation scope) achieved net profit of RMB 333,393,190.55 in 2007, adding retained profit at the beginning of last year amounting to RMB 100,069,231.70, the profit available for distribution was RMB 433,462,422.25, after totally withdrawing RMB 37,550,191.84 as statutory surplus reserve and employee welfare and bonus funds, therefore, the profit available for distribution to shareholders was RMB 395,912,230.41. 37 In accordance with development orientation of the Company with washing machine as main operation and doing well and making core business strong, the Company would not distribute profit for the year 2007 in order to safeguard demand of expansion of reproduction scale. Based on total share capital of 365,103,840 shares as at the end of 2007, the Company would transfer capital reserve into stocks to all shareholders at the rate of 5 for 10, totaling 182,551,920 shares were transferred in. After implementation of the above proposal, the Company’s total share capital would be changed into 547,655,760 shares. VIII. During the report period, the newspapers for information disclosure chosen by the Company were Securities Times and Hong Kong Ta Kung Pao, while the internet website for information disclosure was http://www.cninfo.com.cn IX. Opinion of the independent directors on the external guarantee of the Company In accordance with the requirements of ZJF (2003) No. 56 document and China ZJF (2005) No.120, as independent director of the Company, we conducted carefully review on the external guarantee in line with practical and realistic manner. Now we express the following opinion: 1. As at Dec. 31, 2007, the balance of the external guarantees of the Company totaled RMB 217,425,000, taking up 13.74% of net assets. 2. As at Dec. 31, 2007, the Company had not provided any guarantees for the controlling shareholder or its related parties. 3. As at Dec. 31, 2007, the Company had provided debt guarantees totaling RMB187,425,000,for the guaranteed parties that had an asset liability ratio over 70 percent directly or indirectly. All the aforesaid guarantees were all for shareholding subsidiaries of the Company. 4. As to the external guarantees, the Company had signed counterguaranty agreements with the guaranteed parties according to requirements. 5. The Company had fulfilled its information disclosure duties concerning the external guarantees according to the relevant stipulations in the Listing Rules and the Articles of Association, and had made public all external guarantees of the Company according to facts. 38 Section VIII. Report of the Supervisory Committee I. Meetings of the Supervisory Committee held in the report period During the report period, the Supervisory Committee convened 3 meeting. 1. The 2nd session of the 5th Supervisory Committee was convened on 16 Apr. 2007. Following proposals were examined and approved unanimously at the session: 1) Examined and approved the Work Report 2006 of the Supervisory Committee; 2) Carefully examined the various proposals passed at the 8th session of the 5th Board of Directors 2. The 3rd session of the 5th Supervisory Committee was convened on 5 Aug. 2007. Following proposals were examined and approved unanimously at the session: 1) Examined and approved the Semi­annual Report 2007 and Summary; 2) Examined and approved the Rules of Procedure for the Supervisory Committee (2007 Revised) of the Wuxi Little Swan Co., Ltd. 3. The 4th session of the 5th Supervisory Committee was convened on 25 Oct. 2007. Following proposals were examined and approved unanimously at the session: 1) Examined and approved the 3rd Quarterly Report for the year of 2007 II. Opinion of the Supervisory Committee During the report period, all members of the Supervisors Committee of the Company, on the basis of Company Law of PRC and Articles of Association of the Company, carefully and faithfully performed their supervision duties in the operation activities of the Company, and the following opinions were formed based upon a series of supervision and inspection activities: 1. The various decision­making procedures of the Company were legal and standard in the report period, and a relatively good internal control system had been established. The directors and senior management of the Company had faithfully performed their duties and responsibilities during their work, and had no behaviors that had been against the laws, regulations or Articles of Association, or had done harm to the interests of the Company. 2. The Supervisory Committee had seriously checked and reviewed the Auditors’ Report 2007 of the Company issued by Jiangsu Gongzheng Certified Public Accountants. The Supervisory Committee believed that the unqualified Auditors’ Reports issued by the Certified Public Accountants is true, and that they had truly and fairly reflected the financial status and business performance of the Company of this year. 3. During the report period, the transaction prices of assets purchase or sales were reasonable. Inside dealings had not been detected, nor any cases that had done harm to the interests of the shareholders or had led to the loss of the Company’s assets. 4. There had been related transactions with related parties in the report period. The transactions were fair and reasonable, and the prices were fair and square. No harm had been done to the rights or interests of the nonrelated parties, or to the interests of the Company. 39 Section IX. Significant Events I. There were no significant lawsuits or arbitrations during the report period. II. Important purchases, sales of assets, or mergers of the Company in the report period 1. Purchase of assets During the report period, the Company purchased 35% equity of Little Swan (Jingzhou) Sanjin Electric Appliance Co., Ltd. and 32% equity of Ningbo Xinle Household Appliances Co., Ltd from Jiangsu Little Swan Group Co., Ltd. This transaction was priced by appraisal value and the purchase price was RMB 11,671,000 and RMB 31,233,800 respectively. The aforesaid purchase events were finished within the report period and relevant assets property right has been handled the transfer procedures. These transactions complied with the development strategy of the Company and were benefit to development of the Company for a long times, enhanced market competition power of the Company to solve the horizontal competition between the Company and the controlling shareholder and other related parties, and reduced related transaction, so as to perfect corporate governance and promote standardization operation. 2. Sales of assets 1) During the report period, the Company transferred 92.1% equity of Wuxi Little Swan Real Estate Management Investment Co., Ltd. to Jiangsu Little Swan Group Co., Ltd.. This transaction was priced by appraisal value and the transfer price was RMB 59,995,700. Income from the said transfer was RMB 1,698,600. The net profit the said company contributed to the Company from the beginning of 2007 to sale day was RMB 100,400. The said transactions was benefit to perfect corporate governance and protect interests of medium and small shareholders, peeled those enterprise without relationship with main operation off the Company, which can cause the management team to focus target of main operation to launch work, and was benefit to improve overall operation performance. 2) During the report period, the Company transferred 19% equity of Panasonic Refrigeration Devices (Wuxi) Co., Ltd and 19% equity of Panasonic Home Appliances Refrigerator (Wuxi) Co., Ltd. to Panasonic Corporation. This transaction was priced by negotiation of transaction parties and transfer price was RMB 57.57 million and 96.14 million respectively. Income from the said transfer was RMB 132,180,800. The net profit the said companies contributed to the Company from the beginning of 2007 to sale day was RMB ­2,070,700. The said transactions were benefit to improve business structure of the Company and advance assets quality of the Company. 3) During the report period, the Company transferred 30% equity of Wuxi Little Swan General Electric Appliance Co., Ltd. to GE China. This transaction took auditing price as reference gist and transfer price was USD 7.1 million. Income from the said transfer was RMB 42,431,400. The net profit the said companies contributed to the Company from the beginning of 2007 to sale day was RMB 40,079,200. The said transaction helped to further enhancement of cooperation between the both parties in aspects of R&D and manufacturing of rolling washing machine and development of home and aboard sale market, so as to strengthen the brand of products and 40 market position to fulfill mutual compensation for advantages and win­win object. III. Significant related transactions: 1. Related transaction concerning daily operation Unit: RMB’0000 Selling products and providing labor Purchasing products and accepting labor service to related parties service from related parties Related parties Proportion in the Proportion in the Amount amount of the same Amount amount of the same transaction transaction Guangzhou Attend Logistics Co. Ltd. 2,126.62 0.53% Wuxi Little Swan Clothes Dryer Co., Ltd. 1,160.49 0.29% Wuxi Little Swan Centre Air­Conditioner Co.,Ltd 5.33 0.00% Wuxi Little Swan Household Appliances Co., 414.54 0.10% Ltd. Ningbo Xinle Household Appliance Co., Ltd, 7,380.64 1.84% Wuxi Indesit Home Appliances Co., Ltd. 1,335.90 0.27% 0.00 0.00% Litle Swan (Hong Kong) Co., Ltd. 994.63 0.20% 0.00 0.00% Jiangsu Little Swan Group Co., Ltd. 153.85 0.03% 0.00 0.00% Total 2,484.38 0.5% 11,087.62 2.77% 2. Related transaction concerning purchase of assets and sale of assets On 16 Apr. 2007, the Company held the 8th meeting of the 5th Board of Directors, at which the proposal on purchasing and transferring equity of subsidiary companies was examined and approved. The Company assigned 35% equity of Little Swan (Jingzhou) Sanjin Electric Appliances Co., Ltd. and 32% equity of Ningbo Xinle Household Appliances Co., Ltd. from Jiangsu Little Swan Group Co., Ltd. with purchase price of RMB 11,671,000 and 31,233,800 respectively. Meanwhile, the Company transferred 92.1% equity of Wuxi Little Swan Property Management Investment Co., Ltd. to Jiangsu Little Swan Group Co., Ltd. with transfer price of RMB 59,995,700. The transfer procedures of assets property right has been finished within the report period. 3. Other related transaction On 15 Aug. 2007, the Company held the 12th meeting of the 5th Board of Directors, at which the proposal on Remove Compensation and Related Transaction. The Company and its shareholding subsidiary company respectively signed the Agreement on Remove Compensation with Wuxi Guolian Development (Group) Co., Ltd.. The Company would transfer use right of the part of state­owned land (including land, building on the ground and equipment) located in Huiqian Road and Sheng’an West Road to Wuxi Guolian Development (Group) Co., Ltd. as land reserve, while Wuxi Guolian Development (Group) Co., Ltd. paid the compensation for remove amounting to RMB 277.70 million. 41 IV. Credits, debts between the Company and related parties, influence and solutions: 1. As at 31 Dec. 2007, there was no any non­operating capital occupied by the principal shareholder and related parties of the Company. 2. There was no any current credit, debt and guarantee between the Company and related parties. V. Significant contracts in the report period that need to be disclosed 1. During the report period, there were no events such as significant entrustment, contracting, or leasing. 2. Significant guarantees: As at 31 Dec. 2007, the accumulated amount of guarantee provided by the Company for its shareholding subsidiary companies was RMB 217,425,000, taking up 13.74% of net assets of the Company. Unit: RMB’0000 External guarantee of the Company (excluding the guarantee for the shareholding subsidiaries) Total amount of guarantee occurred in the report period 0 Total balance of guarantee at the end of the report period (A) 0 Guarantee of the Company for the shareholding subsidiaries Total amount of guarantee occurred for shareholding subsidiaries in the report period 21,742.50 Total balance of guarantee occurred for shareholding subsidiaries at the end of the 21,742.50 report period (B) Total guarantee amount of the Company (Including the guarantee for the shareholding subsidiaries) Total amount of guarantee (A+B) 21,742.50 The proportion of the total amount of guarantee in the net assets of the Company 13.74% Of which: The amount of guarantee provided for shareholders, actual controller and other 0 related parties (C) Guarantee amount for the debts of the guaranteed companies with an asset­liability 18,742.50 ratio of over 70 percent, directly or indirectly (D) The amount by which the total guarantee amount exceeded 50 percent of the net 0.00 assets (E) Total amount of the above three guarantees (C+D+E) 18,742.50 3. There was no case of entrusting the others manage the cash assets in the report period. 4. Other significant contracts Please refer to “III. 3. Other related transaction” under IX. Significant Events VI. The commitment of the Company or shareholders holding more than 5% of shares and the performance thereof 1. All nontradable shareholders of the Company committed that, in 12 months after the first transaction day after implementation of the share reforming, the shares would not be sold at Stock Exchange or transfer the non­circulating shares. The said commitment has been execution over. 2. Jiangsu Little Swan Group Co., Ltd. committed that, in 36 months after the first transaction day after implementation of the share reforming, the original nontradable A shares of Little Swan not be sold at Shenzhen Stock Exchange. VII. Accounting firms appointed and dismissed In 2006, the Company engaged Shanghai Shun Lun Pan Certified Public Accountants Co., Ltd as the accounting firms for auditing financial report. The auditing charges for the year 2006 totaled 42 RMB 1,700,000, while business trip charge when they performed relevant business was undertaken by the Company. In accordance with the provision on implementing turn­taking of the Certified Public Accountants from CSRC, as approved by the Shareholders’ General Meeting 2006, the Company appointed Jiangsu Gongzheng Certified Public Accountants Co., Ltd. as accounting firm for auditing financial report 2007. Jiangsu Gongzheng Certified Public Accountants provided auditing service for one year in succession for the Company, including the said auditors’ report. VIII. Securities invested by the Company during the report period 1. Stocks of other listed companies held by the Company Unit: RMB Yuan Stock Short form of Initial Ratio to Book value at Profit and Change of Accounting title Source of code Stock investment equity of year­end loss in the owners’ stock invested reporting equity company period (%) 000417 Hefei Investment Non­public Department 180,000 0.07 0 4,271,390.56 4,271,390.56 income offering Store 000501 Wuhan Investment Non­public Department 135,400 0.03 0 2,795,573.48 2,795,573.48 income offering Store 000759 Wuhan Investment Non­public 100,300 0.02 0 1,504,256.00 1,504,256.00 Zhongbai income offering 600679 Jinshan Investment Non­public Development & 60,000 0.00 0 227,886.00 227,886.00 income offering Construcfion 600377 Jiangsu Investment Non­public 1,980,000 0.02 0 10,219,160.22 10,219,160.22 Expressway income offering 600683 Silvertie Investment Non­public 209,680 0.02 0 664,114.82 664,114.82 Holding income offering 600682 S Njing Xin Available­for­sale Non­public Department 104,300 0.02 104,300.00 financial assets offering Store 601328 Bank Of Available­for­sale Non­public 1,500,000 0.01 21,916,422.00 20,416,422.00 Communications financial assets offering 400038 Huaxin Hi­Tech Available­for­sale Non­public 100,300