小天鹅Ｂ(200418)2008年年度报告（英文版）

Wuxi Little Swan Company Limited Annual Report 2008 Contents I. Company Profile-----------------------------------------------------------------------------2 II. Summary of Accounting Highlights and business Highlights---------------------4 III. Changes in Share Capital and Particulars about Shareholders------------------7 IV. Directors, Supervisors, Senior Management Staff and Employees------------13 V. Corporate Governance-------------------------------------------------------------------16 VI. Particulars about Shareholders’ General Meetings-------------------------------18 VII. Report of the Board of Directors-----------------------------------------------------19 VIII. Report of the Board of Supervisors---------------------------------------------28 IX. Significant Events------------------------------------------------------------------------29 X. Financial Report-------------------------------------------------------------------------- 35 XI. Documents Available for Reference--------------------------------------------------91 - 1 - Wuxi Little Swan Company Limited Annual Report 2008 Important Notes The Board of Directors, the Board of Supervisors and all directors, supervisors as well as senior management staffs of Wuxi Little Swan Company Limited (hereinafter referred to as “the Company”) warrant that this report does not contain any false or misleading statements or omit any material facts and all information set forth herein are true, accurate and complete. Jiangsu Gongzheng Tianye Certified Public Accountants Co., Ltd. issued an Auditors’ Report 2008 with unqualified opinion for the Company. Mr. Fang Hongbo, the Chairman of the Board, Mr. Chai Xinjian, General Manager, and Mr. Zhang Zhaofeng, Chief Financial Officer, hereby confirm that the Financial Report enclosed in this Annual Report 2008 is true and complete. This report was prepared in both Chinese and English. Should there be any difference in interpretation between the two versions, the Chinese version shall prevail. - 2 - Wuxi Little Swan Company Limited Annual Report 2008 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 2. Legal Representative: Mr. Fang Hongbo 3. Secretary to the Board: Ms. Zhou Sixiu Contact address: No. 67, Huiqian Road, Wuxi, Jiangsu Post Code: 214035 Tel: 0510-81082407 Fax: 0510-83720879 E-mail: zhousx@littleswan.com.cn Securities Affairs Representative: Mr. Yao Yanfeng Contact address: No. 67, Huiqian Road, Wuxi, Jiangsu Post Code: 214035 Tel: 0510-81082280 Fax: 0510-83720879 E-mail: yaoyf@littleswan.com.cn 4. Registered Address: No.1, Hanjiang Road, National Hi-tech Industrial Development Zone, Wuxi Post Code: 214028 Office Address: No. 67, Huiqian Road, Wuxi, Jiangsu Post Code 214035 International Website of the Company http://www.littleswan.com E-mail of the Company info@littleswan.com.cn 5. Newspaper Designated by the Company for Disclosing Securities Times and Ta Kung Pao the Information Internet Website designated by CSRC for Publishing the http://www.cninfo.com.cn Annual Report Place Where the Annual Report is Prepared and Placed: Securities Department of the Company 6. Stock Exchange Listed with: Shenzhen Stock Exchange Short Form of the Stock: Little Swan A, Little Swan B Stock Code: 000418, 200418 7. Other Information: Initial Registration Date: 29 November 1993 - 3 - Wuxi Little Swan Company Limited Annual Report 2008 Registration Date after Change: 23 December 2008 Registration place: Industrial and Commercial Administration Bureau of Wuxi, Jiangsu Registration Code of Enterprise Corporation’s Business 320200000014723 License: Registration Code of Taxation (State Taxation Bureau)： 320200704046760 Registration Code of Taxation (Local Taxation Bureau)： 320200704046760 Name of Certified Public Accountants Engaged by the Jiangsu GongZheng TianYe Certified Company: Public Accountants Co., Ltd. Office Address of Certified Public Accountants Engaged No. 28, Liangxi Road, Wuxi by the Company: - 4 - Wuxi Little Swan Company Limited Annual Report 2008 Section II Summary of Accounting Highlights and Business Highlights I. Major accounting highlights as of year 2008 Major index Amount (RMB Yuan) Operating profit 41,894,012.31 Total profit 39,615,160.40 Net profit attributable to shareholders of listed company 40,038,312.01 Net profit attributable to shareholders of listed company after deducting non-recurring gains and losses 87,227,062.55 Investment income 62,913,701.07 Non-operating income 21,839,201.23 Non-operating expense 24,118,053.14 Net cash flow arising from operation activities -134,763,325.16 Net increase on cash and cash equivalent -289,614,881.72 1. Items of non-recurring gains and losses deducted and relevant amount: Items Amount (RMB Yuan) 1) Gains and losses on disposal of non-current assets 4,769,066.54 2) Income from government grant and discount 3,311,495.96 3) Gains and losses on debt restructuring 393,055.13 4) Gains and losses on accrued liabilities unrelated with main -4,000,000.00 operation of the Company 5) Net other non-operation income/expense other than the above- -3,872,964.97 mentioned items 6) Other item of non-recurring gains and losses -60,051,836.44 - Welfare expense written off ( dismiss welfare) 7) Influence on enterprise income tax 13,000,156.85 8) Influence on minority interests -737,723.61 Total -47,188,750.54 2. Items measured by fair value Unit: RMB Yuan Balance at the Balance at the period- Change in current Items period-begin end period Financial assets available for sale 22,474,658 7,045,326 15,429,332 Total 22,474,658 7,045,326 15,429,332 - 5 - Wuxi Little Swan Company Limited Annual Report 2008 3. Difference in net profit as audited under PRC GAAP and IFRSs: Unit: RMB Yuan Items PRC GAAP IFRSs Net profit 25,007,833.46 25,007,833.46 Net assets 1,695,797,240.95 1,695,797,240.95 Explanation on the difference Naught II. Major accounting data and financial indexes over the past three years as ended the report period: 1. Major accounting data Unit: RMB Yuan Increase/decrease 2008 2007 2006 year-on-year (%) Operating income 4,292,987,464.91 5,000,691,662.60 -14.15 4,951,295,444.98 Total profit 39,615,160.40 418,985,767.25 -90.54 34,325,344.41 Net profit attributable to shareholders of 40,038,312.01 333,393,190.55 -87.99 34,430,654.95 listed company Net profit attributable to shareholders of listed company after deducting non- 87,227,062.55 161,937,871.79 -46.14 35,909,892.41 recurring gains and losses Net cash flow arising from operation -134,715,670.16 372,922,270.45 -136.12 320,727,479.21 activities Increase/decrease 31 December 2008 31 December 2007 31 December 2006 year-on-year (%) Total assets 3,339,288,243.96 3,784,516,173.23 -11.76 3,847,948,328.08 Owners’ equity 1,606,316,559.12 1,582,912,495.74 1.48 1,253,925,745.17 Share capital 547,655,760.00 365,103,840.00 50.00 365,103,840.00 2. Major financial indexes Unit: RMB Yuan Increase/decrease year- 2008 2007 2006 on-year (%) EPS-basic (RMB/share) 0.07 0.91 -92.31 0.09 EPS-diluted (RMB/share) 0.07 0.91 -92.31 0.09 Basic EPS after deducting non- recurring gains and losses 0.16 0.44 -63.64 0.13 (RMB/share) Return on net assets (fully diluted) % 2.49% 21.06% -18.57 2.75% Return on net assets (weighted average) % 2.50% 23.50% -21.00 2.84% - 6 - Wuxi Little Swan Company Limited Annual Report 2008 Fully diluted return on net assets after deducting non-recurring 5.43% 10.23% -4.80 3.70% gains and losses % Weighted average return on net assets after deducting non- 5.44% 11.42% -5.98 3.83% recurring gains and losses % Net cash flow per share arising from operation activities -0.25 1.02 -124.51 0.88 (RMB/share) 31 December 31 December Increase/decrease year- 31 December 2006 2008 2007 on-year (%) Net assets per share attributable to shareholders of listed company 2.93 4.34 -32.49 3.43 (RMB/share) III. Change of shareholders’ equity in the reporting period Unit: RMB’0000 Yuan Foreign Total owners’ Share Capital Surplus Retained Items exchange equity attributable capital reserve reserve profit difference to parent company 36,510.3 Amount at the period-begin 67,875.65 14,955.18 39,043.57 -93.53 158,291.25 8 18,255.2 Increase for the current period 376.96 3,626.87 2,340.41 0 Decrease for the current period 19,829.18 89.44 54,765.5 Amount at the period-end 48,046.47 15,332.14 42,670.44 -182.97 160,631.66 8 - 7 - Wuxi Little Swan Company Limited Annual Report 2008 Section III Change in Share Capital and Particulars about Shareholders I. Change in shares 1. Statement of change in shares Unit: Share Before the change Increase/decrease for this time (+, -) After the change Issuance Capitalization Number of Proportion of new Bonus of public Number of Proportion Items shares % share shares reserve Other Subtotal shares % I. Shares subject - to trading moratorium 104,406,948 28.60 52,203,474 12,784,487 39,418,987 143,825,935 26.26 1. Shares held by the State - 0 - 2. Share held by - state-owned corporation 88,908,960 24.35 88,908,960 -88,908,960 - 3. Shares held by domestic general corporation 15,497,988 4.24 52,203,474 76,124,473 128,327,947 143,825,935 26.26 II. Shares not subject to trading moratorium 260,696,892 71.40 130,348,446 12,784,487 143,132,933 403,829,825 73.74 1. Renminbi ordinary shares 133,339,644 36.52 66,669,822 12,784,487 79,454,309 212,793,953 38.86 2. Domestically listed foreign shares 127,357,248 34.88 63,678,624 0 63,678,624 191,035,872 34.88 III. Total shares 365,103,840 100.00 182,551,920 0 182,551,920 547,655,760 100.00 2. Changes in shares subject to trading moratorium Unit: Share Shares subject to Releasing Shares subject trading from trading Increase in to trading Date of Number of shareholders Reason moratorium at the moratorium in this year moratorium at releasing year-begin 2008 the year-end 131,510,011 To continue perform the GD Midea Holding Co., 131,510,011 commitment of share 7 Aug. 2009 Ltd. Note 1 merger reform Wuxi Guolian Development -87,673,341 87,673,341 0 (Group) Co., Ltd. Note 1 Jiangsu Little Swan Group The commitment of 1,235,619 2,175,345 3,410,964 7 Aug. 2009 Co., Ltd. share merger reform Yu Yun Zhong 86,400 77,017 -9,383 15 May 2008 Nanjing Yangzi Petrochemical Industrial 72,000 64,181 -7,819 15 May 2008 Corporation Beijing Haixiang nutritional health products limited 72,000 64,182 -7,818 15 May 2008 liability company Jinhuafa Hardware and Electrical Appliance Co., 72,000 64,182 -7,818 15 May 2008 Ltd. Beijing Xinshi Moxing Scientific Teaching 72,000 64,181 -7,819 15 May 2008 Instrument Co., Ltd. Wuxi Tianchen Technology Trade Development Co., 72,000 64,181 -7,819 15 May 2008 Ltd. - 8 - Wuxi Little Swan Company Limited Annual Report 2008 Zhenjiang Henryda Finance 72,000 64,181 -7,819 15 May 2008 Equipment Co., Ltd. Wuxi Jincheng Rubber & 144,000 128,362 -15,638 15 May 2008 Plastics Factory St Paul Trade Development 72,000 64,182 -7,818 15 May 2008 Co., Ltd. of Xuzhou City Suzhou Xinyuanchang Economic Trading 72,000 64,181 -7,819 15 May 2008 Corporation Jiangsu Provincial Foundation for Poverty 60,000 125,484 65,484 15 May 2008 Alleviation Wuxi Office of Wall Material Innovation & 72,000 64,181 -7,819 15 May 2008 Energy Saving in Building Southern Securities Co., 7,570,900 6,748,700 -822,200 15 May 2008 Ltd. Industrial and Trading 288,000 385,085 97,085 26 Dec. 2008 Company of Yangzhou City Jiangsu Provincial Association of Poverty 12,000 16,045 4,045 26 Dec. 2008 Alleviation & Development Jiangsu Provincial Foundation for Poverty 72,000 96,271 24,271 26 Dec. 2008 Alleviation Tongsheng Decoration Service of Dadong District, 113,760 152,109 38,349 26 Dec. 2008 Shenyang City Beijing E-Mingda 62,288 83,285 20,997 26 Dec. 2008 Biotechnology Co., Ltd. Beijing Stone Intelligent Building Technology 72,000 96,271 24,271 26 Dec. 2008 Company Wenzhou Economic and Trade Corporation of 72,000 96,271 24,271 26 Dec. 2008 Supply and Market Nanjing University of Traditional Chinese 144,000 192,543 48,543 26 Dec. 2008 Medicine Gao Xiu Feng 72,000 96,271 24,271 26 Dec. 2008 Zhang Xue Zhen 122,400 163,661 41,261 26 Dec. 2008 Yu Jin Ming 21,600 28,882 7,282 26 Dec. 2008 8,904,960 Other domestic corporation 5,936,640 2,968,320 Note 2 Total 104,406,948 9,063,889 48,482,876 143,825,935 Note 1: On 26 Feb. 2008, Wuxi Guolian Development (Group) Co., Ltd. (hereinafter referred to as “Guolian Group”), the former controlling shareholder of the Company, signed the Share Transfer Agreement with GD Midea Holding Co., Ltd. (hereinafter referred to as “Midea Holding”), in which Guolian Group transfer its 87,673,341 shares of Little Swan A (accounting for 24.01% of total share capital of the Company) to Midea Holding. The said matter had been approved and applied with Guo-Zi-Chan-Quan [2008] No. 283 by the State-owned Assets Supervision and Administration Commission of the State Council on 24 Mar. 2008. Furthermore, the procedure of share transfer had been completed on 7 Apr. 2008. The Company made information disclosure on 8 Apr. 2008. The Company implemented the proposal on transferring capital reserve into share capital for the year 2007 at the rate of 5 for 10 on 22 May 2008. GD Midea Holding Co., Ltd. held 131,510,011 A shares of the Company. Note 2: The Company accomplished the share merger reform on 4 Aug. 2006. There were 14 shareholders participated in the share merger reform among all non-circulating shareholders of the Company, and the rest 94 shareholders’ considerations of the share merger reform were paid in - 9 - Wuxi Little Swan Company Limited Annual Report 2008 advance by the former controlling shareholder, Jiangsu Little Swan (Group) Co., Ltd.. By the end of reporting period, the Company has finished the repaying work for consideration paid in advance for 79 non-circulating shareholders and releasing from trading moratorium. At present, there are still 29 non-circulating shareholders did not release from trading moratorium with total shares amounting to 8,904,960 shares. 3. Issuance and listing of securities 1) Securities issuance over the past three years The Company did neither securities issuance nor listing over the past three years by the end of reporting period. 2) Changes in total shares of the Company and structure During the reporting period, the Company implemented the proposal on transferring capital reserve into share capital for the year 2007, namely, based on original total share capital of 365,103,840 shares, the Company had transferred capital reserve into share capital to all shareholders at the rate of 5 for 10. After the transfer, the balance of capital reserve of the Company was RMB 497,084,795.87, and the total share capital was increased to 547,655,760 shares from 365,103,840 shares. 3) Existent shares held by internal staffs of the Company There existed no shares held by internal staffs of the Company. II. About shareholders 1. As at 31 Dec. 2008, the Company has 46,487 shareholders in total, including 34,218 ones of A- share and 12,169 ones of B-share. 2. Particulars about shares held by the top ten shareholders and top ten shareholders holding shares not subject to trading moratorium Unit: share Total number of shareholders 46,487 shareholders (34,218 ones of A-share and 12,269 ones of B-share) Particulars about shares held by the top ten shareholders Number of Total shares subject to Shares Nature of number of trading pledged or Name of shareholders shareholders Proportion shares held moratorium held frozen Domestic GD Midea Holding Co., Ltd. corporation 24.01% 131510011 131510011 TITONI INVESTMENTS DEVELOPMENT Overseas LTD. corporation 5.63% 30851714 Great China Development Co., Ltd. Overseas corporation 5.52% 30212211 State-owned Finance Bureau of Wuxi corporation 4.68% 25645531 Overseas GAO-LING FUND,L.P. corporation 2.60% 14233792 Overseas Shanghai Wanguo (H.K.) Ltd. corporation 1.77% 9677279 Bank of Communications-Hua An Baoli Domestic Allocation Fund Securities Investment Fund corporation 5179900 - 10 - Wuxi Little Swan Company Limited Annual Report 2008 0.95% Agricultural Bank of China-Xincheng Domestic Sijihong Hybrid Securities Investment Fund corporation 0.93% 5066898 Overseas Zeng Ying corporation 0.88% 4801965 Industrial and Commercial Bank of China- Guangfa Strategic Well-chosen Hybrid Domestic Securities Investment Fund corporation 0.67% 3648576 Particulars about shares held by the top ten shareholders holding shares not subject to moratorium Name of shareholders Numbers of shares not Type of shares subject to moratorium held TITONI INVESTMENTS DEVELOPMENT LTD. 30851714 Domestically listed foreign shares (B shares) Great China Development Co., Ltd. 30212211 Domestically listed foreign shares (B shares) Finance Bureau of Wuxi 25645531 Renminbi ordinary shares (A shares) GAO-LING FUND,L.P. 14233792 Domestically listed foreign shares (B shares) Shanghai Wanguo (H.K.) Ltd. 9677279 Domestically listed foreign shares (B shares) Bank of Communications-Hua An Baoli Allocation Fund Securities Investment Fund 5179900 Renminbi ordinary shares (A shares) Agricultural Bank of China-Xincheng Sijihong Hybrid Securities Investment Fund 5066898 Renminbi ordinary shares (A shares) Zeng Ying 4801965 Domestically listed foreign shares (B shares) Industrial and Commercial Bank of China- Guangfa Strategic Well-chosen Hybrid Securities Investment Fund 3648576 Renminbi ordinary shares (A shares) Industrial and Commercial Bank of China- Zhongyin Dynamic Strategic Stock Securities Investment Fund 3165990 Renminbi ordinary shares (A shares) Explanation on associated relationship among GD Midea Holding Co., Ltd. and TITONI INVESTMENTS the top ten shareholders or acting-in-concert DEVELOPMENT LTD. are persons acting in concert. 3. Introduction to the controlling shareholder and actual controller 1) Change in the controlling shareholder and actual controller Name of new controlling shareholder GD Midea Holding Co., Ltd. Date of change in new controlling shareholder 7 Apr. 2008 Date of publishing information on change in new controlling 8 Apr. 2008 shareholder Newspaper where published the information on change in Securities Time and Ta Kung Pao new controlling shareholder Name of new actual controller He Xiangjian Date of change in new actual controller 7 Apr. 2008 Date of publishing information on change in new actual 8 Apr. 2008 - 11 - Wuxi Little Swan Company Limited Annual Report 2008 controller Newspaper where published the information on change in Securities Time and Ta Kung Pao new actual controller 2) Introduction to the controlling shareholder and actual controller (1) About the controlling shareholder Name: GD Midea Holding Co., Ltd. Legal representative: He Xiangjian Registered capital: RMB 1,260,713,286 Yuan Business scope: production, manufacturing and sale of household appliances, electric motor, communication equipment and its components, as well as technical consulting service for the above-mentioned products, molds and equipment self-made, and hotels management; sale of electronic product and general merchandise; export of self-produced products of the Group and member enterprises and relevant technology, as well as import of raw materials, machinery & equipment, apparatus & meter and components for production and scientific research, as well as relevant technology; processing imported materials and processing with foreign materials, assembling, processing in accordance with samples (operating based on [99] Wai-Jing-Mao-Zheng- Shen-Han-Zi No. 528). (2) About the actual controller Name: He Xiangjian Citizenship: The People's Republic of China (without residence permit in other countries or regions) Mr. He has been engaged as Chairman of the Board in Midea Holding during the past five years. (3) The property right and controlling relationship among the controlling shareholder, the actual controller of the Company and the Company are as follows: He 100% 90% Foshan Shunde LiXun Investment Foshan Shunde Tiantuo Investment 17% 75% 30% 30% Midea Group Co., Ltd Foshan Shunde Kailian Industrial 90% Foshan Meide Household Electrical Appliances Group Co., 55% Guangdong Midea Kitchen & Sanitary Electrical Appliances 46.74 4.17% 0.46% 0.13% Gd Midea Holding Co., Ltd. 100% Midea Investment Holding (BVI) 100% Titoni Investments Development - 12 - 5.63% 24.01% Wuxi Little Swan Company Limited Wuxi Little Swan Company Limited Annual Report 2008 Section IV Directors, Supervisors, Senior Management Staffs and Employees I. Directors, supervisors and senior management staffs 1. Basic information Amount of Whether drawing Shares Shares Reason payment from the payment from Ending held at Name Office title Sex Age Start date held at the for the Company shareholders’ date the year- year-begin change in the reporting company or other end period (RMB) related units Chairman of the Fang Hongbo Male 41 2008.05 2009.08 0 0 Naught Yes Board Director , Naught Chai Xinjian Male 46 2006.08 2009.08 0 0 1,004,000 General Manager Li Jianwei Director Male 41 2008.05 2009.08 0 0 Naught Yes Wang Jianguo Director Male 32 2008.05 2009.08 0 0 Naught Yes Liang Naught Director Male 53 2006.08 2009.08 0 0 20,000 Bingcong Wu Ganping Director Male 35 2008.05 2009.08 0 0 Naught 20,000 Independent Naught Zhao Shuping Male 56 2008.05 2009.08 0 0 20,000 director Independent Naught Ye Yongfu Male 61 2008.05 2009.08 0 0 20,000 director Independent Naught Zhang Aimin Male 44 2008.05 2009.08 0 0 80,000 director Chairman of the Naught Li Li Board of Male 34 2008.05 2009.08 0 0 74,696 Supervisors Li Jiankang Supervisor Male 44 2008.05 2009.08 0 0 Naught 153,200 Li Jianzhong Supervisor Male 45 2008.05 2009.08 0 0 Naught 216,600 Xu Li Deputy GM Female 38 2007.11 2009.08 0 0 Naught 396,000 Li Hong Deputy GM Male 46 2006.08 2009.08 0 0 Naught 496,000 Zhang Naught CFO Male 34 2008.05 2009.08 0 0 98,664 Zhaofeng Secretary to the Zhou Sixiu Female 36 2007.01 2009.08 0 0 Naught 218,600 Board Note: The time for the two Independent Directors, Zhao Shuming and Ye Yongfu, to receive allowance would be from October 2008 to December 2008; the time for Zhang Zhaofeng, Chief Financial Officer, and Li Li, Chairman of the Board of Supervisors to accept salary in the Company would be from May 2008 to December 2008. 2. The situation of the working experience of, office title held by and concurrent post held by the present director, supervisor and senior management staff: 1) Mr. Fang Hongbo, Chairman of the Board, master degree, an economist. He ever took the posts of General Manager of Marketing Department in Air-conditioner Division, as well as of Deputy General Manager and General Manager of Air-conditioner Division subordinate to GD Midea Holding Co., Ltd.. And now he holds the posts of Chairman of the Board of the Company, of Vice - 13 - Wuxi Little Swan Company Limited Annual Report 2008 Chairman of the Board and President of GD Midea Holding Co., Ltd., of Chairman of the Board in Hefei Royalstar Washing Machine Co., Ltd, Hefei Royalstar Motor Co., Ltd., Hefei Royalstar Mould Co. Ltd., as well as Hefei Royalstar Household Electrical Appliance Co., Ltd.. 2) Mr. Chai Xinjian, Director, General Manager, doctor degree. He ever took the posts of Director of the Technology Center and of Standing Deputy General Manager in Wuxi Little Swan Company Limited. And now he acts as General Manager of the Company. 3) Mr. Li Jianwei, Director, master degree. He ever took the post of secretary to the Board in GD Midea Holding Co., Ltd.. And now he takes positions of Director of GD Midea Holding Co., Ltd., of Director and Vice-president of Midea Group Co., Ltd., and of Director of Valin (Group) Co., Ltd.. 4) Mr. Wang Jianguo, Director, master degree. He ever took the posts of the Head of the Financial Department in the Midea Air-conditioner Headquarters, Management Controller of Midea air- conditioning supply chain，Chief Operating Officer of Midea Holding, Chief Officer of the AD and HR Department, etc. And now he is General Manager of the Refrigerator Division in GD Midea Holding Co., Ltd.. 5) Mr. Liang Bingcong, Director, MBA degree. He ever took the posts of Executive Director of Xinhua Hong Kong Group, of CEO of the Tailai Taikoo (British) Co., Ltd.. And now he works in the Investment Management Company of the Cathay Capital Group, also in charge of Director of Project Company who operates several investments in China participated in by the Cathay Capital Group. 6) Mr. Wu Ganping, Director, bachelor degree, an accountant. He ever worked in Wuxi Passenger Transport Co., Ltd. and Jiangsu Kuailu Motor Transport Co., Ltd., etc. Now he holds the post of the Asset Management Dept. in Wuxi Guolian Development (Group) Co., Ltd.. 7) Mr. Zhao Shuming, Independent Director, doctor degree. He ever took the post of Independent Director in Suning Appliance. Now he is Dean of School of Business in Nanjing University, and Independent Director of SOHO International Group and KHD Humbolbt Bedag International Company. 8) Mr. Ye Yongfu, Independent Director, master degree. He ever took the posts of Deputy Director of Wuxi Municipal Economic Commission, of Director and Secretary of Leading Party Group in Wuxi Municipal Economic and Trade Commission, and concurrently held Deputy Secretary- general of the Municipal Government, of Director of the Enterprise Management Center, as well as Deputy Leader of Wuxi Support Leading Group. 9) Mr. Zhang Aiming, Independent Director, professor of accounting. He ever took the posts of Director of the Department of Accounting and of Division Chief of Financial Department in East China University of Science and Techonology, and of Independent Director of Shanghai Sanmao (Group) Holding Co., Ltd.. Now, he holds the posts of Division Chief of Auditing Department and of professor of the School of Business in East China University of Science and Technology, and of - 14 - Wuxi Little Swan Company Limited Annual Report 2008 Independent Director of Shanghai Huayan Smartech Co., Ltd.. 10) Mr. Li Li, Chairman of the Board of Supervisors, master degree. He ever took the posts of Regional Manager of the Marketing Department, of Manager of Management Department and of Head of Business Department in the Air-conditioner Division subordinate to Midea Holding, and of Assistant General Manager of Marketing Department in Washing Machine Division subordinate to Midea Holding, and of Chief Operating Officer of the Company. Now, he holds the post of Director of HR in Midea Holding. 11) Mr. Li Jiankang, Supervisor, junior college degree, an accountant. He ever took the posts of Section Chief of Financial Department in both Wuxi HSBC Real Estate Development Co., Ltd. and Wuxi Hongyi Real Estate Development Co., Ltd., of Project Manager of Wuxi Donghua Certified Public Accountants Co., Ltd., of Minister of the Auditing Department in Wuxi Little Swan Co., Ltd., Project Manager of Auditing Department in Wuxi Guolian Development (Group) Co., Ltd.. Now he occupies the post of Chief Financial Officer in Shanghai Broadband Technology Co., Ltd.. 12) Mr. Li Jianzhong, Supervisor, college degree, a senior political engineer. He ever took the posts of Section Chief, of Department Staff of equipment department, of Vice-chairman of the factory labor union, of Section Chief of the party-masses department, Section Chief of human resources department, and of Chairman of the labor union in Wuxi No. 3 Cotton Mill. He is currently the Chairman of the labor union, secretary of the discipline inspection commission and deputy controller of the human resources department in Wuxi Little Swan Company Limited. 13) Ms. Xu Li, bachelor degree, an engineer. She ever took the posts of Section Chief of the Technics Department in Washing Machine Factory of Wuxi Little Swan Company Limited and of Director of the QA Department in Wuxi Little Swan Company Limited, and of Deputy General Manager of Little Swan General Appliance Co., Ltd.. Now she holds the post of Deputy General Manager of the Company. 14) Mr. Li Hong, doctor degree, EMBA, researcher-level Senior Engineer. Now he acts as Deputy General Manager of the Company. He ever took the posts of assistant professor of Nanjing University of Science and Technology, of Assistant to factory manager and factory manager in washing machine factory of Wuxi Little Swan Company Limited, of Representative of quality manager, of Director of technology center of the Company, and of Assistant General Manager in Wuxi Little Swan Company Limited 15) Mr. Zhang Zhaofeng, postgraduate student. He ever took the posts of Chief Financial Officer of the Family Air-conditioner Domestic Marketing Department, of CFO of Midea-Toshiba-Carrier Joint Venture and of CFO in Family Air-conditioner Division, of Supervisor of Staff representatives and concurrently CFO of the Home Air-conditioner Domestic Division in Midea Holding. Now he acts as Chief Financial Officer of the Company. 16) Ms. Zhou Sixiu, bachelor degree, accountant. Now, she holds a post of Secretary to the Board. She served as Securities Affair Representative, Deputy Director of Securities Investment Department, and Deputy Director of GM Office, etc. in Wuxi Qingfeng Stock Co., Ltd. 3. Changes in engagement and dismissal of Directors, Supervisors and Senior Management Staffs within the reporting period: - 15 - Wuxi Little Swan Company Limited Annual Report 2008 1) Changes of directors: On 16 Apr. 2008, due to equity change of the Company or job change, Mr. Wan Guanqing, Mr. Mao Zhiliang, Mr. Xue Tao and Mr. Huang Yongxiang resigned from directors of the Company and other posts in the Board. At the Annual Shareholders’ General Meeting 2007 held on 9 May 2008, the Proposal on Additionally Electing Directors of the Company was examined and approved, namely, Mr. Fang Hongbo, Mr. Li Jianwei, Mr. Wang Jianguo and Mr. Wu Ganping were elected as directors of the 5th Board of Directors. Owing to expiration of the office term of Mr. Yang Jiahua and Mr. Lvwei, two Independent Directors, the Company examined and approved the Proposal on Changing Independent Director of the Company at the 1st Temporary Shareholders’ General Meeting for 2008 held on 10 Sept. 2008. Both Mr. Zhao Shuming and Mr. Ye Yongfu were elected as Independent Directors of the 5th Board of Directors of the Company. 2) Changes of supervisors: On 16 Apr. 2008, due to equity change of the Company or job change, Ms. Chen Yanmeng, Mr. Ma Jun and Mr. Yu Jingbo resigned from supervisors of the Company and other posts in the Board of Supervisor. At the Annual Shareholders’ General Meeting 2007 held on 9 May 2008, the Proposal on Additionally Electing Supervisors of the Company was examined and approved, and namely, Mr. Li lLi and Mr. Li Jiankang were elected as supervisors of the 5th Board of Supervisors. On 9 May 2008, at the joint conference, the leaders of the three meeting of the Company’s 5th Worker's Congress and person in charge of the expert panel approved to Mr. Li Jianzhong as employee’s representatives supervisor of the Company’s 5th Board of Supervisors. 3) Changes of senior management staffs： At the 17th Meeting of the 5th Board of Directors held by the Company on 4 Apr. 2008, the Proposal on Letter of Resignation Submitted by Chief Financial Officer of the Company and the Proposal on Changing Chief Financial Officer of the Company were examined and passed. The Company agreed Mr. Tang Xingliang to resign from CFO and to engage Mr. Zhang Zhaofeng as CFO of the Company. II. About employees Type Total number Proportion (%) Administrative personnel 48 4.16% Financial personnel 41 3.56% Sales personnel 231 20.03% Technician 104 9.02% - 16 - Wuxi Little Swan Company Limited Annual Report 2008 Production personnel 729 63.23% Total 1153 100.00% Among them: 20 persons hold master degree or over; 294 persons hold bachelor degree; 186 persons hold junior college degree; 370 persons graduate from technical secondary school; 283 persons graduated from school below. - 17 - Wuxi Little Swan Company Limited Annual Report 2008 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 Company Law of PRC, Securities Law and Administrative Rule for Listed Companies from CSRC. In the reporting period, in accordance with the requirement of the Notice on Matters Concerning Carrying out a Special Campaign to Strengthen the Corporate Governance of Listed Company with ZJGSZi [2007] No. 28 document from CSRC, of the Notice on Doing Well the Related Work Concerning a Special Campaign to Strengthen the Corporate Governance of Listed Company from Shenzhen Stock Exchange, and of the Notice on Related Work Concerning Carrying out a Special Campaign to Strengthen the Corporate Governance of Listed Company with ZJGSZi [2007] No. 104 document from Jiangsu Securities Regulatory Bureau of CSRC, and combining with prophase self-inspection rectification plan, public comment opinion and requirements of the rectification suggestions made by Jiangsu Securities Regulatory Bureau and Stock Exchange, the Company carried out overall rectification work and drew up a sustaining rectification plan. As examined and approved at the 21st Meeting of the 5th Board of Directors of the Company, the relevant public notice was disclosure on Securities Times, Ta Kung Pao and the internet website http://www.cninf.com.cn on 29 Jul. 2008. In accordance with the Circular on Related Work Concerning Carrying out Administrative Measures on Information Disclosure by Listed Companies and the follow-up requirements, as examined and passed by the Company at the 20th Meeting of the 5th Board of Directors, the Company revised its Information Disclosure System. According to regulations of Administration Rule for Listed Companies, along with the Company’s practical situation, the Company revised its Detailed Rules for Auditing Committee under the Board of Directors via review and approval by the Company at the 24th Meeting of the 5th Board of Directors. 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. In the reporting period, two independent directors ended their office term, therefore, the Company replaced two independent directors in line with the Proposal on Changing Independent Directors of the Company examined and approved at the 22nd Meeting of the 5th Board of Directors. The Company had 3 independent directors at present, taking up one third of all directors of the Board 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 reporting period on time and expressed their independent opinion on such significant events such 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 directors attending the Board meetings: Name of Entrusted Due presence Presence in Absence Independent presence (times) person (times) (times) Directors (times) Yang Jiahua 6 6 0 0 - 18 - Wuxi Little Swan Company Limited Annual Report 2008 Lui Wei 6 5 1 0 Zhang Aimin 10 9 0 1 Zhao Shuming 4 4 0 0 Ye Yongfu 4 3 1 0 2. In the reporting period, the Company’s 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 “five-separation” 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 management staff 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 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 separated from the controlling shareholder in business. IV. Performance valuation and encouragement system for senior management staff The selection, appraisement and encouragement of the senior management staff of the Company were implemented according to the relevant regulations of the Company Law and the Articles of Association of the Company. The Company established comprehensive management system based on KPI, continued to perfect the annual compensation system closely linked with the Company’s operating achievements, which was decided by the Board of Directors, and it has effectively strengthened the sense of responsibility and improved work enthusiasm of the whole senior executives. Section VI Brief Introduction to the Shareholders’ General Meeting During the reporting period, the Company held three shareholders’ general meetings in total. The details are as follows: I. Annual Shareholders’ General Meeting 2007 was held. Resolutions of this meeting were published on Securities Times and Ta Kung Pao on 10 May 2008. II. The 1st Temporary Shareholders’ General Meeting 2008 was held. Resolutions of this meeting - 19 - Wuxi Little Swan Company Limited Annual Report 2008 were published on Securities Times and Ta Kung Pao on 11 Sep. 2008. III. The 2nd Temporary Shareholders’ General Meeting 2008 was held. Resolutions of this meeting were published on Securities Times and Ta Kung Pao on 12 Dec. 2008. - 20 - Wuxi Little Swan Company Limited Annual Report 2008 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 The external environment of the Company changed greatly in 2008. price-rising of raw material, fluctuation of exchange rate, change of labor relationship, change of real estate market and global financial crisis made great influence on the washing machine industry. In view of relevant data, domestic sales of washing machine increased year-on-year from the 1st quarter to the 3rd quarter of 2008. But the growth slowed down since the 4th quarter of 2008, especially in November and December, production and sales decreased year-on-year. Refrigerator business declined by a large margin year-on-year. Therefore, the production and sales of washing machine in the 4th quarter declined by a large margin. Besides, the Company used more than 60 million to dispose labor relationship in progress of moving back to industrial park and the one-off income decreased about RMB 200 million year-on-year, which caused large decline of the general achievements of the Company in 2008. Shareholding of controlling shareholders changed greatly in 2008. GD Midea Holding Co., Ltd acquired 24.01% equity of the Company from Wuxi Guolian Development (Group) Co., Ltd on Apr. 4, 2008 and became the first major shareholder of the Company. Year 2008 was a year of optimization and adjustment on internal of the Company. The Company injected energy by optimization of organization, integration and reorganization of marketing system, research & development system, manufacture and supply system, renewal and alteration of management procedure, separation of main business and non-main business, reformation of assessment incentive mechanism, etc. In the report period, the Company realized sales income RMB 4,293 million and net profit being RMB 40,030,000. Main work in the report period were as follows: (I) Accelerate business integration and promote reasonable collocation of resource The Company accelerated integration of washing machine business in 2008, and definitely positioned as medium and high-grade washing machine business. The Company continually developed automatism wash machine business, extended rotary washing machine business and reduced cost of manufacturing double cylinder washing machine business. Meanwhile, the Company continued to advance liquidation of non-main business, sold shareholding of subsidiaries like Sanjiang Electric MFG. Co., Ltd, Wuxi Little Swan Ceramic Co., Ltd, Wuxi Little Swan High- Grade Casting Co., Ltd and liquidation of Wuxi Little Swan Enami Molf & Precise Co., Lt, Little Swan Palaima Industry Co., Ltd and Toshiba Washing Machine (Wuxi) Co., Ltd, which supported the Company focused on development of washing machine business. At present, the Company had completed integration of purchase business of subsidiaries and primarily established supply chain management including Wuxi FILIN Electronics Co., Ltd, Wuxi Little Swan Huaying Electrical Appliance Co., Ltd and Little Swan (Jingzhou) Sanjin Electric Appliances Co.，Ltd. (II) Actively extend market, plough deeper and harvest more The Company completed integration of domestic sale and oversea sale in 2008. The Company gradually perfect structure of domestic sale by entry executive agency of Midea air conditioner; completed separation of sale services system; actively took part in “sale household appliance in rural area” and support exploiting the 3rd and 4th grade market; strengthened and stabilized international relationship of strategic partner and export of high-end bulky rotary washing machine - 21 - Wuxi Little Swan Company Limited Annual Report 2008 increased stably. (III) Insist on technology innovation and promote competitive power The Company insisted on self-research & development and technology innovation in 2008, and exploited new products more than 400. In the 1st Annual Meeting of Washing Machine Industry 2008, brand of little swan won four awards of “The Best Brand in Domestic Washing Machine Market in 2008”, “Brand of Technology Innovation of Washing Clean”, “Brand of Innovation of Appearance Design” and “The Most Competitive Washing Machine Brand”. The Company won “The Best Design Award of Self-innovation for the third time in China (Wuxi) International Industrial Design Expo which is also “Grand Ceremony of Innovation 2008”. Mist-form water tile washing machine won “The Second Prize of Advancement of Science & Technology of Light Industry”. INOV rotary washing machine won Award of Energy-Saving and Award of Environment Protection in China Household Appliance Expo 2008. In 2008, the Company successfully exploited controller of rotary washing machine, which further promoted technology competition power. (IV) Perfect management mechanism and optimize organization structure In 2008, the Company innovated assessment & incentive mechanism, reformed organization structure, and new management model of “management budget and operation with authorization” made run of organization more active; reformed procedure by way of information technology, realized ERP system in production line at the end of the year and the capability of cost control and risk control strengthened; accelerated sales of dead material and products, and decreased inventories; strictly control receivable accounts and reduced risk of loss from bad debt. All management of the Company was more refined and standard. (V) Advance entire moving to new industrial park actively and properly deal with staff relationship In 2008, the Company started to establish industrial park in new area as scheduled in accordance with requirement of Wuxin Municipal Government and completed purchase and tendering of main framework of workshop and professional equipment. The Company planned to complete entire moving in 2009. In 2008, the Company resolved changes of labor contract of employees due to moving with effort of several months with guidance and help of relevant ministry, which created advantage chance for continuous healthy development of the Company. 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 4,292,987,500 as well as profit from main operation amounting to RMB 41,894,000. 1) Statement of main operations classified according to industries Unit: RMB’0000 Main business classified according to industries Increase/decrease of Increase / decrease Increase/ decrease of Operating classified according to Operating Operating operating revenue of operating cost operating profit profit industries or products revenue cost compared with the last compared with the ration compared with ration (%) year (%) last year (%) the last year (%) Industrial income 43,353.35 36,417.83 16.00 21.49 17.73 2.69 Commercial income 241,482.19 184,230.45 23.71 -27.97 -27.00 -1.01 - 22 - Wuxi Little Swan Company Limited Annual Report 2008 Import & export income 111,119.28 98,595.12 11.27 3.72 0.87 2.51 Labor service income 2,321.61 1,255.51 45.92 -4.67 204.14 -37.13 Material, semi- manufactured goods 30,513.75 28,443.66 6.78 61.02 55.48 3.32 and other income Rental income 508.57 597.43 -17.47 -16.30 -15.84 -0.64 Main business classified according to industries Washing machine 289,851.64 229,970.51 20.66 -11.18 -10.11 0.94 Refrigerators 62,056.62 52,259.24 15.79 -47.90 -46.03 2.91 Other 44,046.56 37,013.64 15.97 134.67 141.17 2.26 2) Statement of main operations classified according to areas Unit: RMB’0000 Increase/decrease of operating revenue over the last year Area Operating revenue (%) Domestic 2,549,526,316.13 -31.94% Overseas 1,410,021,869.77 10.20% 3) Main suppliers and customers Unit: RMB’0000 Total amount of purchase of the top five suppliers 58,450 Proportion in the total amount of purchase 16.61% Total amount of sales of the top five sales customers 58,386 Proportion in the total amount of sales 13.13% 3. Changes in assets structure of the Company in the report period: Proportion in total assets at the Proportion in total assets at the end of Increase/decrease year-on- Assets structure end of 2008 (%) 2007 (%) year (%) Accounts receivable 12.65 12.34 0.31 Inventories 20.81 17.19 3.62 Long-term equity investment 6.55 6.73 -0.18 Fixed assets 15.04 14.33 0.71 Project in construction 0.43 0.90 -0.47 Short-term loan 2.24 5.03 -2.79 Short-term loan decreased RMB 1,15,570,000 year-on-year mainly because the Company strengthened capital management, fully made use of residual monetary capital and reduced loan from bank. 4. Changes in expense structure of the Company in the report period in the report period: Proportion in total assets at the end of Proportion in total assets at the end of Increase or decrease year-on- Operating expense 2008 (%) 2007 (%) year (%) Administrative expense 15.35 15.67 -0.32 Financial expense 6.98 4.42 2.56 Income tax 0.51 1.36 -0.85 Operating expense 0.44 1.90 -1.46 Administrative expense: The Company and the employees negotiated to terminated labor contract - 23 - Wuxi Little Swan Company Limited Annual Report 2008 in the progress of entire moving to hi-tech zone, which supplied economic compensation for RMB 60,520,000. 5. The change of cash flow of the Company in the report period: (RMB’0000) Increase/decrease Margin of increase or Index Year 2008 Year 2007 year-on-year decrease year-on-year (%) Net cash flow arising from operating activities 13,471.57 37,292.23 -50,763.80 -136.12 Net cash flow arising from investing activities 7,548.30 25,368.72 -32,917.02 -129.75 Net cash flow arising from financing activities 7,941.62 -45,827.75 37,886.13 -82.67 Net increase of cash and cash equivalents 28,961.49 16,129.17 -45,090.66 -279.56 Net decrease of cash and cash equivalents: the net cash flows arising from operating activities decreased mainly because demand for household electrical appliances declined owing to macro economy changed and global economic crisis; reorganized inner of the Company and adjusted marketing strategy; the net cash flows arising from investing activities decreased mainly because of increase investment of new industrial park, decrease disposal of shareholding of subsidiaries; the net cash flows arising from financing activities decreased mainly because of decrease of repayment of loan from bank. 6. Operation and analyses on the business performance of the main controlling companies (1) Operation of the Company’s main wholly-funded affiliated enterprises and controlling subsidiaries 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 2008 totaling RMB 263,400,673.57, net profit being 2,425,739.08 and the total assets being RMB 180,575,930.90. Wuxi Little Swan Huayin Electrical Appliance Co., Ltd: A company of limited liability and the Company’s controlling subsidiary; the registered capital totaling RMB 49,673,400; its main businesses being manufacturing and sales of electric machineries; its sales income in 2008 totaling RMB 147,918,177.07, its net profit being RMB -2,626,014.94 and the total assets being RMB 75,945238.06. 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 dry-cleaning machines, dishwasher, etc; its sales income realized in 2008 totaling RMB 872,717,160.13, its net profit being RMB 34,874,744.07 and the total assets being RMB 231,908,505.78. 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 2008 totaling RMB 538,074,883.14, its net profit being RMB -22,188,237.98 and the total assets being RMB 368,512,265.94. (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% equity; its registered capital totaling USD 29,275,000; its main businesses being the production and sales of washing machines, washer-driers, dish washers, as well as the electric - 24 - Wuxi Little Swan Company Limited Annual Report 2008 kitchenware and their components and parts, mainly modular kitchen utensils, modular kitchen range, disinfection cabinet, and extractors; its sales income realized in 2008 being RMB 1,357,606,100, the profit from main businesses totaling RMB 250,310,000, the net profit being RMB 107,772,500 and net assets at the end of the year being RMB 351,316,927.09. II. Outlook of future development of the Company 1. Development trend of the industry and outlook of the market The global economy remains in the doldrums. Influenced by the real estate industry and the market’s consumption confidence, it is estimated that, except a few varieties, the expected overall sales and sales price of the washing machine industry will both decline. The Company estimates the first half of 2009 will still be a hard time for the market although the prices of raw material and rate of foreign exchange may be stable. With the implement of the government’s industrial rejuvenation program and the deepening of the “Home Appliances to the Countryside” scheme, a recovery of the washing machine industry in the second half year may become possible. The Company will continue its effort to adapt to market changes by unceasingly focusing on the development of the high-end energy-saving, environment-protection products, updating and renew products, and optimizing the series structure. At the same time, the Company will take the opportunity of “retreating from the city and moving into the countryside” to update, adjust and upgrade the production, focusing on the launching of the drum washing machines and its accessory products and optimizing production of wheel washing machine and will carry out the assessment management by classification of the products. Development plan in 2009 1. Reform the marketing system and decentralize the market decision-making authority The Company will govern and assess the sales product center in accordance with the product center and decentralize the market decision-making authority to the front-line market so as to stimulate the sales team’s vitality and accelerate decision-making; take the “Home Appliances to the Countryside” scheme as a guide to exploit the third and the fourth market; continue to exploit exclusive shop actively, optimize the structure of sales channels, implement the operation mode of product specialization, assess in accordance with the value chain in order to expand the proportion of new product line in sales. 2. Catch opportunities of policies and enhance the competitiveness of products The Company will research and develop new products which adapt to the changing market environment according to stimulation or rejuvenation programs of different world markets, especially new products conforming to China’s rejuvenation program. The focal point is to increase the core technology input of the drum washing machine and its related product so as to improve the product line and product value chain and provide suitable product to break into the European market; continue to further research and develop suitable products for the third and the fourth market, strengthen the competitiveness of the products “to the Countryside”. 3. Enhance international cooperation and expand export business Continue to stabilize international strategic partnership, expand the scope of cooperation and deepen the cooperation, especially in the steady expansion of the North America’s high-end market, do everything possible to break the European market and expand the Asia-Pacific market, unceasingly enrich and perfect the product line aiming at new market environment changes to meet new demand of the global different markets. 4. Perfect management, reduce cost and improve efficiency The Company will roundly implement the perfect management, unceasingly reduce the cost and cost rate, strengthen the competitiveness and continue to improve the information technology - 25 - Wuxi Little Swan Company Limited Annual Report 2008 systems and make improvement to the supply chain management and value chain information management basing on the ERP system. Purchasing costs can be reduced by optimizing the supply chain while design cost can be constantly optimized and reduced by standardizing and generalizing the product design. Improve organization efficiency by optimization of the internal management processes, engagement better staff and administration simplification Through the control of inventory and receivable, asset efficiency will be improved and the operation risk will decrease. Strictly control the consumption of production and continuously improve production efficiency. III. 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 or the application of proceeds raised previous continued to the report period. 2. Use of non-raised proceeds 1) New industrial park was start to construction formally on 19 Jun. 2008 when the programming was completed. During the report period, investment for basic construction was about RMB 97,000,000, and 45% of the project had been completed. 2) The Company acquired and merged 10% equity of Wuxi FILIN Electronics Co., Ltd and 32% equity Ningbo Little Swan Electrical Appliance Co., Ltd, which was held by Jiangsu Little Swan Group Co., Ltd, with consideration being RMB 6,022,200 and RMB 2,352,000 respectively. The equity proportion of Wuxi FILIN Electronics Co., Ltd held by the Company raised from 61% to 73% after acquisition and merger. The Company was the first major shareholder of Ningbo Little Swan Electrical Appliance Co., Ltd with 32% equity. IV. Auditing opinions given by the Certified Public Accountants Jiangsu Gongzheng Tianye Certified Public Accountants Co., Ltd. engaged by the Company had provided unqualified Auditors’ Reports for the Annual Report 2008 of the Company. V. 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 10 meetings in the report period, from the 17th meeting to the 26th meeting of the 5th term. The details were as follows: 1) The 17th meeting of the 5th Board of Directors was held on-site, the resolutions of the meeting were published in Securities Times and Hong Kong Ta Kung Pao dated 5 Apr. 2008. 2) The 18th meeting of the 5th Board of Directors was held by way of communications, the resolutions of the meeting were published in Securities Times and Hong Kong Ta Kung Pao dated 18 Apr. 2008. 3) The 19th meeting of the 5th Board of Directors was held on-site, the resolutions of the meeting were published in Securities Times and Hong Kong Ta Kung Pao dated 10 May 2008. 4) The 20th meeting of the 5th Board of Directors was held by way of communications, the resolutions of the meeting were published in Securities Times and Hong Kong Ta Kung Pao dated 16 Jul. 2008. 5) The 21st meeting of the 5th Board of Directors was held by way of communications, the resolutions of the meeting were published in Securities Times and Hong Kong Ta Kung Pao dated 29 Jul. 2008. 6) The 22nd meeting of the 5th Board of Directors was held by way of communications, the resolutions of the meeting were published in Securities Times and Hong Kong Ta Kung Pao dated 19 Aug. 2008. 7) The 23rd meeting of the 5th Board of Directors was held on-site, the resolutions of the meeting were published in Securities Times and Hong Kong Ta Kung Pao dated 11 Sep. 2008. - 26 - Wuxi Little Swan Company Limited Annual Report 2008 8) The 24th meeting of the 5th Board of Directors was held on-site, the resolutions of the meeting were published in Securities Times and Hong Kong Ta Kung Pao dated 25 Oct. 2008. 9) The 25th meeting of the 5th Board of Directors was held by way of communications, the resolutions of the meeting were published in Securities Times and Hong Kong Ta Kung Pao dated 25 Nov. 2008. 10) The 26th meeting of the 5th Board of Directors was held by way of communications, the resolutions of the meeting were published in Securities Times and Hong Kong Ta Kung Pao dated 17 Dec. 2008. 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 capitalizing of public reserve funds plan of 2007 reviewed and approved by Shareholders’ General Meeting 2007, the Company actualized capitalizing plan on 22 May 2008 and 26 May 2008 for A shareholders and B shareholders respectively., capitalizing public reserve fund at the rate of 5 shares to 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, fulfilled their duties, and performed the following responsibility: 1) Checked and approved audit plan of 2008 and relevant information, negotiated and confirmed the arrangement of date of audit on financial report of the Company in 2008 with Jiangsu Gongzheng Tianye Certified Public Accountants Co., Ltd.: The Audit Committee of the Board of Directors checked and approved Audit Plan of 2008, which was submitted by Finance Department of the Company on 23 Dec. 2008, fully communicated with person in charge of Jiangsu Gongzheng Tianye Certified Public Accountants Co., Ltd and reached agreement on the aforesaid audit plan on 25 Dec. 2008, which considered that the plan was made carefully and born responsibility personally, and effectively guarantee the successful conducting of the audit of 2008. 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. 2009, including capital balance as of 31 Dec. 2008, profit statement of 2008, 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: (1) The data of financial accounting statement, which was made by the Company, faithfully reflected assets and liability as for 31 Dec. 2008 and operating results in 2008. (2) Approved that financial audit of 2007 based on the financial statement, noticed the 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 - 27 - Wuxi Little Swan Company Limited Annual Report 2008 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 18 Feb. 2009 and issued primary opinions, including balance sheet as of 31 Dec. 2008, profit statement of 2008, 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 2008 faithfully reflected assets liabilities of the Company up to 31 Dec. 2008 and operating results in 2008. (2) Approved that prepared annual report 2008 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 2008 was disclosed as scheduled. 5) After Jiangsu Gongzheng Tianye Certified Public Accountants Co., Ltd issued audit report 2007, the Audit Committee of the Board of Directors held a meeting, and summarized the annual audit of Jiangsu Gongzheng Tianye Certified Public Accountants Co., Ltd: (1) Summary report on audit work 2008 by the Audit Committee of the Board of Directors The Audit Committee of the Board of Directors checked and approved Audit Plan of 2008, which was submitted by Finance Department of the Company on 23 Dec. 2008, fully communicated with person in charge of Jiangsu Gongzheng Tianye Certified Public Accountants Co., Ltd and reached agreement on the aforesaid audit plan on 25 Dec. 2008, which considered that the plan was made carefully and born responsibility personally, and effectively guarantee the successful finish of the audit of 2008. There are 15 persons (including person in charge of the project) of Jiangsu Gongzheng Tianye Certified Public Accountants Co., Ltd engaged in audit on 8 Jan. 2009. Of which the 15 auditors completed audit of companies which were in range of the consolidated statement on 16 Feb. 2009. Person in charge of the project communicated with members 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 on-site, 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 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 - 28 - Wuxi Little Swan Company Limited Annual Report 2008 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 Mar. 2009. The Audit Committee considered that the Certified Public Accountants conducted their audit in accordance with the China’s Independent Auditing Standard with enough time, reasonable arrangement of auditing personnel and professional ability, also the issued financial statement adequately reflected the financial position of the Company as at 31 December 2008, and the results of operations and the cash flows of the Company for the year then ended, which the audit conclusion comply with the actual situation of the Company. (2) Particular about meetings held by the Audit Committee of the Board of Director of Wuxi Little Swan Co., Ltd. The meeting of Audit Committee of the Board of Directors was held by way of communications on 28 Feb. 2009. Three commissioners should attend this meeting and all of them presented at the meeting. All members of the Audit Committee unanimously agreed on the following resolutions by means of voting ways of signature. Proposal I. Reviewed and approved Financial Settlement Report 2008; Proposal II. Reviewed and approved Annual Report 2008 and Summary; Proposal III. Reviewed and approved Summary Report for Auditing Working 2008 of the Audit Committee of the Board of Directors Proposal IV. Reviewed and approved Resolution on Engagement of Certified Public Accountants. 4. Performance of Remuneration and Appraisal Committee The Remuneration 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 Remuneration and Appraisal Committee of the Board of Directors strictly appraised directors, supervisors and senior management in accordance with standard and procedures for performance appraisal. Remuneration of senior management of the Company will pay once confirmed by Remuneration and Appraisal Committee by In the report period, remuneration and Appraisal Committee convened the meeting and sincerely heard Report on Remuneration for Senior Management of the Company 2008. VI. Draft proposal for profit distribution and transfer capital to stocks of 2008 According to Audit Report issued by Jiangsu Gongzheng Tianye Certified Public Accountants Co., Ltd, the Company (parent company) realized net profit RMB 37,696,097.87 in 2008, adding retained profit at the beginning of the year amounting to RMB 881,062,210.74, the profit available for distribution was RMB 918,758.308.61, after withdrawal of RMB 3,769,609.79 as statutory surplus reserve, profit available for distribution to shareholders was RMB 914,988,698.82 The Company will finish task of entire moving to hi-tech zone in 2009 as scheduled. At present, the new industry park was in construction. In order to guarantee need of extended production, the Company neither plan to distribute profit, nor transfer public reserve to capital stock. Particulars about the bonus distribution of the Company over the past three years Unit: RMB Yuan Net profit Ratio in net profit Amount of cash bonus attributable to owners attributable to owners of (tax included) of parent company parent company under the - 29 - Wuxi Little Swan Company Limited Annual Report 2008 under the consolidated consolidated statement statement 2007 0.00 333,393,190.55 0.00% 2006 5,476,557.60 34,430,654.95 15.91% 2005 0.00 40,101,475.96 0.00% VII. During the report period, the newspapers for information disclosure of the Company were Securities Times and Hong Kong Ta Kung Pao, while the internet website for information disclosure was http://www.cninfo.com.cn VIII. 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 of 31 Dec. 2008, balance of the external guarantees of the Company totaled RMB 65,330,000, taking up 4.07% of net assets. 2. As of 31 Dec. 2008, the Company had not provided any guarantees for the controlling shareholder or its related parties. 3. As of 31 Dec. 2008, the Company had provided debt guarantees totaling RMB 62,830,000, for the guaranteed parties that had an asset liability ratio over 70% directly or indirectly. All the aforesaid guarantees were for subsidiaries of the Company. 4. As to the external guarantees, the Company had signed counter-guarantee agreements with the guaranteed parties according to requirements 5. The Company had fulfilled its responsibility of information disclosure concerning the external guarantees according to the relevant stipulations in the Listing Rules and the Articles of Association, and had disclosed all external guarantees of the Company faithfully. - 30 - Wuxi Little Swan Company Limited Annual Report 2008 Section VIII Report of the Board of Supervisors I. Meetings held by the Board of Supervisors during the reporting period During the reporting period, the Board of Supervisors convened five meetings. 1. The 5th session of the 5th Board of Supervisors was held on 4 Apr. 2008. Following proposals were examined and approved unanimously at the session: 1) Examined and approved the Work Report 2007 of the Board of Supervisors; 2) Examined and approved the Annual Report 2007 and its Summary. 2. The 6th session of the 5th Board of Supervisors was held on 17 Apr. 2008. Following proposals were examined and approved unanimously at the session: 1) Examined and approved the 1st Quarterly Report 2008; 2) Examined and approved the Proposal on Additionally Electing Supervisor of the Company. 3. The 7th session of the 5th Board of Supervisors was held on 9 May 2008. Following proposals were examined and approved unanimously at the session: 1) Examined and approved the Proposal on Electing the Chairman of the Board of Supervisors. 4. The 8th session of the 5th Board of Supervisors was held on 17 Aug. 2008. Following proposals were examined and approved unanimously at the session: 1) Examined and approved the Semi-Annual Report 2008 and its Summary. 5. The 9th session of the 5th Board of Supervisors was held on 21 Oct. 2008. Following proposals were examined and approved unanimously at the session: 1) Examined and approved the 3rd Quarterly Report 2008 and its Summary; II. Opinion of the Board of Supervisors During the reporting period, all members of the Board of Supervisors of the Company, according to Company Law of PRC and the Articles of Association of the Company, carefully and faithfully performed their supervision functions in the operation activities of the Company, and the following opinions were formed based upon a series of supervision and review: 1. During the reporting period, the various decision-making procedures of the Company were legal and standard, and a relatively perfect internal control system had been established. The directors and senior management staffs of the Company had fulfilled their responsibilities during the course of performing his duties. Moreover, none of the directors or senior management staffs violated of the laws, regulations or Articles of Association, nor did anyone of them do anything harmful to the interests of the Company. 2. The Board of Supervisors had seriously checked and reviewed the Auditors’ Report 2008 of the Company issued by Jiangsu Gongzheng Tianye Certified Public Accountants Co., Ltd.. The Board of Supervisors believed that the unqualified Auditors’ Reports issued by the Certified Public Accountants is true, and had truly and fairly reflected the financial status and operating results of the Company for the year 2008. - 31 - Wuxi Little Swan Company Limited Annual Report 2008 3. During the reporting 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 existed related transactions between the Company and related parties in the reporting period. The transactions were fair and reasonable, and the prices were fair. No related transaction harmful to the rights or interests of the nonrelated parties and to the interests of listed company had been found. - 32 - Wuxi Little Swan Company Limited Annual Report 2008 Section IX Significant Events I. There was no significant lawsuit or arbitration during the reporting period. II. Important purchases, sales of assets, or mergers of the Company in the reporting period 1. Purchase of assets During the reporting period, the Company purchased 12% equity of Wuxi Feiling Electronics Co., Ltd. and 32% equity of Ningbo Little Swan Household Appliance Co., Ltd. held by Jiangsu Little Swan Group Co., Ltd. The said transaction is priced based on the assets evaluation result at the purchase price of RMB 6,022,100 and RMB 2,352,000 respectively. The Company owned 73% equity of Wuxi Feiling Electronics Co., Ltd. from original 61%, moreover, the Company held 32% equity of Ningbo Little Swan Household Appliance Co., Ltd., which the Company became the first principal shareholder of both companies. The said transaction was in conformity with law the development strategy of the Company and was be helpful for the long-term development of the Company, enhanced market competition power of the Company, so as to perfect corporate governance and promote standardization operation. 2. Sales of assets 1) During the reporting period, 51% equity of Jiangsu Little Swan Sanjiang Electrics Appliance Manufacturing Co., Ltd. (hereinafter referred to as “Sanjiang Electrics Appliance”) held by the Company was transferred to Mr. Huan Yijun, the natural person shareholders of Sanjiang Electrics Appliance, at the price of RMB 28,968,000. The net profit the said company contributed to the Company from the beginning of year 2008 to date of assets sale was RMB -3,421,400. The said transaction was benefit to perfect corporate governance and to protect interests of medium and small shareholders, peeled those enterprises without relationship with main operation off the Company, so as to launch work around the development of main operation, and be in favor of overall progress in operation performance. 2) During the report period, the Company transferred the part of models and equipments used for manufacturing twin tub washing machine to Hefei Royalstar Washing Equipment Manufacturing Co., Ltd. at the transfer price of RMB 10,891,400. The said transaction was in compliance with the strategic guidance of “Standing on Washing and Strengthening Main Operation”, displayed the target and orientation the Company focused on developing middle- and high-end washing machine. The said transaction was benefit to improve product structure, to enhance gross profit margin of products and to promote core competitiveness of the Company. III. Significant related transactions: 1. Related transaction concerning routine operation Unit: RMB’0000 Yuan Purchasing products and Selling products and providing accepting labor service labor service to related parties Related parties from related parties Proportion in the Proportion in Amount Amount amount of the the amount of - 33 - Wuxi Little Swan Company Limited Annual Report 2008 same transaction the same transaction Hefei Royalstar Washing 33.86 0.01 Equipment Manufacturing Co., Ltd. Wuxi Indesit Home Appliances Co., Ltd. 1021.17 0.24 Toshiba Washing Machine (Wuxi) 6.05 0.00 Co., Ltd Foshan Weiling Washer Motor 1522.94 0.43 Manufacturing Co., Ltd. Foshan Midea Material Supply Co., 1908.30 0.54 Ltd. Ningbo Xinle Household 6348.67 1.80 Appliances Co., Ltd Total 1061.08 0.25 9779.91 2.78 2. Related transaction concerning purchase and sale of assets On 18 Apr. 2008, the 18th meeting of the 5th Board of Directors was held by the Company, at which the proposal on purchasing 32% equity of Ningbo Little Swan Household Appliance Co., Ltd. was examined and approved, namely, the Company purchased 32% equity of Ningbo Little Swan Household Appliance Co., Ltd. held by Jiangsu Little Swan Group Co., Ltd. The said transaction is priced based on the assets evaluation result at the purchase price of RMB 2,352,000. The transfer procedures of assets property right has been finished within the reporting period. On 21 Oct. 2008, the 24th meeting of the 5th Board of Directors was held by the Company, at which the proposal on increasing equity of two subsidiaries was examined and approved, namely, the Company purchased 12% equity of Wuxi Feiling Electronics Co., Ltd. and 10% equity of Wuxi Little Swan Pottery Co., Ltd. held by Jiangsu Little Swan Group Co., Ltd. The said transaction is priced based on the assets evaluation result at the purchase price of RMB 6,022,100 and RMB 404,900 respectively. The transfer procedures of assets property right has been finished in the reporting period. On 17 Dec. 2008, the 26th meeting of the 5th Board of Directors was held by the Company, at which the proposal on selling the part of models and equipment of the Company was examined and approved, namely, the Company transferred the part of models and equipments used for manufacturing twin tub washing machine to Hefei Royalstar Washing Equipment Manufacturing Co., Ltd. at the transfer price of RMB 10,891,400. The transfer procedure of assets has been finished in the reporting period. 3. Other related transaction On 24 Nov. 2008, the 25th meeting of the 5th Board of Directors was held by the Company, at which the proposal on related transaction by joint investment between related parties was examined and approved, namely, Little Swan (Hong Kong) Ltd. signed the Equity Transfer Agreement with Midea Investment Holding (BVI) Ltd.. Little Swan (Hong Kong) Ltd. transferred its 27% equity of - 34 - Wuxi Little Swan Company Limited Annual Report 2008 Wuxi Feiling Electronics Co., Ltd. to Midea Investment Holding (BVI) Ltd. at the transfer price of RMB 13,550,000. Wuxi Feiling Electronics Co., Ltd. is a subsidiary company of the Company, whose 61% equity was held by the Company. Midea Investment Holding (BVI) Ltd. is a wholly-owned subsidiary company of GD Midea Holding Co., Ltd. (the controlling shareholder of the Company), therefore, Midea Investment Holding (BVI) Ltd. is a related party of the Company. The said transaction is a related transaction by joint investment between related parties. IV. Credits, debts between the Company and related parties, as well as influence and solutions: 1. As at 31 Dec. 2008, there was no any non-operational 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 contract in the reporting period that need to be disclosed 1. During the reporting period, there were no events such as significant entrustment, contracting, or leasing. 2. Significant guarantees: As at 31 Dec. 2008, the accumulated amount of guarantee provided by the Company for its shareholding subsidiary companies was RMB 65,330,000, taking up 4.07% of net assets of the Company. Unit: RMB’0000 Yuan External guarantee of the Company (excluding the guarantee for the shareholding subsidiaries) Total amount of guarantee occurred in the reporting period 0 Total balance of guarantee at the end of the reporting period (A) 0 Guarantee provided by the Company for the shareholding subsidiaries Total amount of guarantee occurred for shareholding subsidiaries in the reporting 6533 period Total balance of guarantee occurred for shareholding subsidiaries at the end of the 6533 reporting period (B) Total guarantee amount of the Company (including the guarantee for the shareholding subsidiaries) Total amount of guarantee (A+B) 6533 The proportion of the total amount of guarantee in the net assets of the Company 4.07 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 asset-liability 6283 ratio of over 70 percent, directly or indirectly (D) The amount by which the total guarantee amount exceeded 50 percent of the net 0 assets (E) Total amount of the above three guarantees (C+D+E) 6283 3. There was no case of entrusting the others manage the cash assets in the reporting period. 4. Other significant contracts Please refer to “III. 3. Other related transaction” under “IX. Significant Events”. - 35 - Wuxi Little Swan Company Limited Annual Report 2008 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, within 12 months since the date that the share merger reform was implemented, no trading or transfer of shares of the Company held by them occurred. The said commitment has been execution over. 2. Jiangsu Little Swan Group Co., Ltd. committed that, within 36 months since the date that the original non-circulating A shares of Little Swan obtained circulation right, it did not sell the said non-circulating shares via Shenzhen Stock Exchange. VII. Accounting firms appointed and dismissed At the Annual Shareholders’ General Meeting 2007 held on 9 May 2008, the proposal on engaging auditor for the financial report 2008 was passed. The Company continued to engage Jiangsu GongZheng Certified Public Accountants Co., Ltd. (now re-named Jiangsu Gongzheng Tianye Certified Public Accountants Co., Ltd.) as Auditor of the Company. Jiangsu Gongzheng Tianye Certified Public Accountants Co., Ltd. provided auditing service for two years in succession for the Company, including the auditors’ report 2008. During the report period, the Company paid auditing expense of RMB 1,900,000 to Jiangsu Gongzheng Tianye Certified Public Accountants Co., Ltd.. VIII. Securities invested by the Company during the reporting period 1. Stocks of other listed companies held by the Company Unit: RMB Yuan - 36 - Wuxi Little Swan Company Limited Annual Report 2008 Stock Short form of Initial Ratio to Book value at Profit and Change of Accounting Source code Stock investment equity of year-end loss in the owners’ title of stock invested reporting equity company period (%) Financial assets Non- 60068 S Ning Xinbai 104,300 0.02 239,400.00 135,100.00 available for public 2 sale offering Financial assets Non- 60132 Bank of 1,500,000 0.01 6,650,694.00 5,150,694.00 available for public 8 Communications sale offering Financial assets Non- 40003 Huaxin Gaoke 100,300