粤高速Ｂ(200429)2008年年度报告（英文版）

Guangdong Provincial Expressway Development Co., Ltd. 2008 Annual Report February 20, 2009 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot Important Notes The board of directors and directors of the Company hereby guarentes that there are no false records, misleading representation or important omissions in this report and shall assume joint and several liability for the authenticity, accuracy and completeness of the contents hereof. The annual report of this year is adopted by the ninth meeting of the fifth board of directors of the company. all the other directors presented the meeting made their votes. Lixin Yangcheng Certified public Accountants audited the financial report of the Company for this Report period and issued standard unqualified auditor’s report. Chairman of board of directors Mr.Zhou Yuming, General Manager of the Company Mr. Li Xiyuan and Chief Accountant of the Company Mr.Xiao Laijiu State:Financial Report in the report is true and complete. 1 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot Table of Contents I.Basic Information of the Company II.Summary of Accounting Highlights and Business Highlights III.Change of share capital and shareholding of Principal Shareholders IV.Information abount Directors, Supervisors and SeniorExecutives V.Administrative stucture VI.Particulars about shareholders’ general Meeting VII.Report of the Board of Directors VIII.Report of the Supervisory Committee IX.Important Events X.Financial Report XI.Documents available for inspection This report has been prepared in both Chinese and English. In case of any discrepancy , the Chinese version shall prevail. 2 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot I.Basic Information of the Company (1)Legal name of the company Name in chinese：广东省高速公路发展股份有限公司 Name in English：Guangdong Provincial Expressway Development Co.Ltd. English abbreviation：GPED (II)Legal representative:Zhou Yuming (III)Secretary of the Board of Directors：Zuo Jiang Contact Address：85 Banyun Road, Guangzhou, Guangdong Province Tel：(020)83731365 Fax：(020)83731363 E-mail：zuoj@gdcg.cn zuojiang22@yahoo.com.cn Securities affair representative：Feng Xinwei Contact Address：85 Banyun Road, Guangzhou, Guangdong Province Tel：(020)83731388-231 Fax：(020)83731384 E-mail：fengxw@gdcg.cn fengxw2007@163.com (IV).Registered address of the Company：85 Banyun Road, Guangzhou, Guangdong Province Office address：85 Banyun Road, Guangzhou, Guangdong Province Postal code：510100 Website：http:www.gpedcl.com E-mail：ygs@gpedcl.com (V).Designated newspapers for information disclosure：Securities Times, China Secuties, Shanghai Secuties Daily and Hongkong Commercial Daily Web Address for publication of Annual Report(Appointed by the China SecuritiesRegulatory Commission)：www.cninfo.com.cn Address for Reference：Law Securities Dept. of the Company (VI)Stock exchange for listing：Shenzhen Stock Exchange Stock abbreviation:Expressway A,Expressway B Stock code：000429、200429 (VII)Relevant information 3 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot 1.First Registration Date of Company：February 9,1993 Registered Address：4/F,Dongjian Building, No.503, Dongfeng Zhong Road, Guangzhou, Guangdong Province The date of last registration change：December 17,2007 Registered address：85 Banyun Road, Guangzhou, Guangdong Province 2.Company’s business registration Namber：440000400006921 3.Company’s Tax Registration Namber：440102190352102 4.Organization Code：19035210-2 5.Company’s Auditor’s Lixin Yangcheng Certified Public Accountants Co., Ltd. Office address：11/F,Yaozhong Plaza, No.3-15 Linhe Xi Road, Tianhe District,Guangzhou 4 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot II.Summary of Accounting Highlights and Business Highlights (1)The total profit earned by the company in the report year and its composition: Unit：RMB Item Year 2008 Operation profit 559,568,021.76 Total profit 527,908,490.13 Net profit attributable to shareholders of the listed company 398,260,910.28 Net profit after deducting of non-recurring gain/lossattributable to the shareholders of the listed company 413,774,137.90 Cash flow generated by business operation , net 589,798,119.24 Note: Items of non-recurring gains and losses deducted Unit：RMB Items of non-recurring gains and losses Amount (1)Gain/loss form disposal of non-current assets -23,834,805.61 (II)Tax refund, deduction and exemption that is examined and approved by - authority exceeding or has no official approval document. (III)Governmental Subsidy accounted as current gain/loss - (IV)Capital occupation fee collected from non-financial organizations and - accounted as current gain/loss (V)Gain/loss generated when the consolidation costsis less then the - recognizable fair value attributable to the Company. (VI)Non-monetary asset exchange gain/loss. - (VII)Gain/loss investment of Commission - (VIII)Asset impairment provisions for force major such as natural disasters - (IX) Gain/loss from debt reorganization - (X) Enterprise reorganization expenses, such as payment to stuff placement - and consolidation expenses (XI) Gain/loss from trades obviously departed from fair value - (XII) Net gain/loss of current term from consolidation of subsidiaries under - common control from beginning of term to the consolidation date (XIII) Gain/loss from debt forcasting without connection to the main - business operation (XIV) Net amount of non-business gain/loss other than the above items 54,404.65 (IV) Other items confirmed by CSRC 699,102.06 Total -23,081,298.90 Amount of influence of income tax 7,568,071.28 Influences on net profit after tax -15,513,227.62 Net 398,260,910.28 Deduction of non-operating gains and losses to net profit 413,774,137.90 5 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot 6 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot (II).Highlights of accounting data and financial indicators in the latest three years （1）Highlights of accounting data Unit：RMB Changed over last year Year 2008 Year 2007 Year 2006 （％ Tumover 937,278,307.42 1,113,184,855.26 -15.80% 1,067,225,172.69 Total profit 527,908,490.13 741,353,475.45 -28.79% 587,877,680.80 Net profit attributable to the 398,260,910.28 493,661,982.44 -19.33% 343,832,811.98 shareholders of the listed company Net profit after deducting of non-recurring gain/loss 413,774,137.90 532,651,070.07 -22.32% 344,647,694.90 attributable to the shareholders of listed company Cash flow generated by business 589,798,119.24 690,825,203.69 -14.62% 596,064,454.05 operation, net Changed over last year End of 2008 End of 2007 End of 2006 （％） Gross Assets 7,299,537,500.43 5,802,360,457.26 25.80% 5,885,270,482.17 Shareholders’ equity attributable to 3,421,104,860.21 3,324,552,209.45 2.90% 3,044,600,244.17 shareholders of the company Capital stock 1,257,117,748.00 1,257,117,748.00 0.00% 1,257,117,748.00 （2）Highlights o financial indicators Unit：RMB Changed over last Year 2008 Year 2007 Year 2006 year（%） Basic gains per share 0.32 0.39 -17.95% 0.27 Diluted gains per share 0.32 0.39 -17.95% 0.27 Basic earning per share after deducting 0.33 0.42 -21.43% 0.27 of non-recurring gains/losses Net income on asset, fully diluted 11.64% 14.85% Decreased 3.21% 11.29% Net income on asset, Weighted 11.90% 15.59% Decreased 3.69% 11.63% Net income on asset, fully diluted and 12.09% 16.02% Decreased 3.93% 11.32% deducted non-recurring gain/loss Net income on asset, weighted and 12.36% 16.72% Decreased 4.36% 11.66% deducted non-recurring gain/loss 7 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot Net cash flow per share generated by 0.47 0.55 -14.55% 0.47 business operation Changed over last End of 2008 End of 2007 End of 2006 year（%） Net asset per share attributable to 2．72 2.64 3.03% 2.42 shareholders of the listed company 8 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot III. Change of Share Capital and Shareholding of Principal Shareholders (I).Changes in share capital 1.Changes in share capital Unit: share Before the change Increase/decrease（+，-） After the Change Amount Proportio Capital n ization Share of Bonus allotm commo Other Subtotal Quantity Proportion shares ent n reserve fund 1.Shares with conditional 489,920,806 38.97% -41,114,938 -41,114,938 448,805,868 35.70% subscription 1.State-owned 408,229,394 32.47% 14,208 注 1 14,208 408,243,602 32.47% shares 2.State-owned legal person 23,468,541 1.87% 23,468,541 1.87% shares 3.Other domestic 58,006,668 4.61% -41,115,558 -41,115,558 16,891,110 1.34% shares Incl：Non-state owned domestic 58,006,668 4.61% -45,076,592 注 2 -45,076,592 12,930,076 1.03% legal person shares Domestic natural 0 0.00% 3,961,034 注 3 3,961,034 3,961,034 0.32% person shares 4.Foreign shareholding Incl：Overseas legalperson shares Foreign nature person share 5 .Executive 216,203 -13,588 -13,588 202,615 0.02% shares II.Shares with unconditional 767,196,942 61.03% 41,114,938 41,114,938 808,311,880 64.30% subscription 1.Common 418,446,942 33.29% 41,114,938 41,114,938 459,561,880 36.56% shares in RMB 2.Foreign shares 348,750,000 27.74% 348,750,000 27.74% in domestic 9 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot market 3.Foregn shares in overseas market 4.Other III.Total of capital 1,257,117,748 100.00% 1,257,117,748 100.00% shares Note 1：In the report term, Reasons for the increase of shares with sale conditions held by the state: Foshan Auto Repair Factory repaid 14,208 counterpart shares to Guangdong Communication Group Co.,Ltd . Note 2. In the report term, Reasons for the decrease of shares with sale conditions held by non-state-owned legal persons: 41,101,350 negotiable shares subject to sale conditions held by non-state-owned legal persons were listed for trading without restriction from January 7, 2008. 3,961,034 shares of legal person transferred to 836 natural persons, which correspondingly transferred from "shares held by domestic non-state-owned legal persons" to "shares held by domestic natural persons", which were still shares with sale conditions; Foshan Auto Repair Factory repaid counterpart 14,208 shares to Guangdong Transportation Group Co., Ltd.; the three item reduced 45,076,592 shares altogether. Note 3：In the report term, Reasons for the increase of shares with sale conditions held by domestic natural persons: 3,961,034 shares of legal person transferred to 836 natural persons, correspondingly transferred from "shares held by domestic legal persons" to "shares held by domestic natural persons" which were still shares with sale conditions; the 4,490 shares held by Mr. Chen Chuxuan, the new chair of the board of supersion, were “shares held by domestic natural persons”; the two items increased 3,965,524 shares all altogether. The former present Chao Xiaofeng had quited his position for six months, 18,078 shares of “shares held by domestic natural person” held by him were unfreezen; this item decreased 18,078 shares. 2.Change in conditional shares Conditional Increased Reason of condition Conditional Name of the shares at Released this year Date of shares at end shareholder beginning of this year releasing of year year Reform commitment ： The As the non-negotiable shares of the controlling Company will not be listed, shareholders Guangdong traded or assigned within 12 currently Communicatio 408,229,394 0 14,208 408,243,602 months from the date of increased n Group obtaining the right of listing their shares in Co.,Ltd and negotiation. Such shares the Company, shall not be listed or traded it can not be within twenty four months dealt with 10 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot after the expiration of the said relevant period of 12 months. formalities about conditional shares As the controlling The non-negotiable shares of shareholders the Company will not be currently listed, traded or assigned increased within 12 months from the their shares in Guangdong date of obtaining the right of the Company, Expressway 16,775,435 0 0 16,775,435 listing and negotiation. Such it can not be Co., Ltd shares shall not be listed or dealt with traded within twenty four relevant months after the expiration of formalities the said period of 12 months. about conditional shares Guangdong As the Communicatio controlling n Development The non-negotiable shares of shareholders Company the Company will not be currently listed, traded or assigned increased within 12 months from the their shares in date of obtaining the right of the Company, 589,239 0 0 589,239 listing and negotiation. Such it can not be shares shall not be listed or dealt with traded within twenty four relevant months after the expiration of formalities the said period of 12 months. about conditional shares As the The non-negotiable shares of controlling the Company will not be shareholders listed, traded or assigned currently Guangdong within 12 months from the increased Guanghua date of obtaining the right of 3,242,107 0 0 3,242,107 their shares in Expressway listing and negotiation. Such the Company, Company shares shall not be listed or it can not be traded within twenty four dealt with months after the expiration of relevant the said period of 12 months. formalities 11 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot about conditional shares As the controlling The non-negotiable shares of shareholders the Company will not be currently listed, traded or assigned increased Guangdong within 12 months from the their shares in Traffic date of obtaining the right of the Company, 2,130,510 0 0 2,130,510 Development listing and negotiation. Such it can not be Company shares shall not be listed or dealt with traded within twenty four relevant months after the expiration of formalities the said period of 12 months. about conditional shares on the one hand, promised in equity reform scheme "since the date of the non-tradable shares of the company owning the right of listing, within 12 months, they can not be listed for transactions or State-owned transfers"; On the other legal person hand, part of legal and other 58,737,918 41,115,558 0 17,622,360 Unsure shareholders paid the price Domestic of equity reform on be half shareholder of Guangdong Communication Group Co.,Ltd., before they return the price to Guangdong Commmunication Group Co.,Ltd., their shares will be limited to sell. Directors, Supervisors , Senior Executives 216,203 18,078 4,490 202,615 Executive shares Unsure 12 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot Total 489,920,806 41,133,636 18,698 448,805,868 － － (II)Issuing and placing of shares 1.Ended by the end of the report period, there existed no particulars about listing ofsharesor dervative securities over all previous three years in the Company. (III)Particulars about the shsreholders 1.Top 10 holders of shares with subscription conditions Unit:shares Total of shareholders(as of The Company had 116,213 shareholders in total, including 74,672 December31,2008) shareholders holding A shares and 41,541 shareholders holding B shares. Top 10 holders of shares(As of (December 31,2008) Properties of Share Name of the shareholder Total shares Conditional shares Pledged or frozen shareholder proportion % Guangdong State-owned Communication Group 40.60% 510,415,485 408,243,602 102,171,883 shares Co.,Ltd Guangdong Expressway State-owned 1.33% 16,775,435 16,775,435 0 Co., Ltd shares 102 Portfolio of National Other 1.12% 14,099,813 0 0 Social Security Fund Guangdong Yuecai Turst State-owned 0.97% 12,174,345 0 0 Investment CO., Ltd. shares China Life insurance Co., Ltd.—Dividend-Individual Other 0.40% 4,999,958 0 0 dividend-005L-FH002 Shen Guangdong Guanghua State-owned 0.26% 3,242,107 3,242,107 0 Expressway Co., Ltd. shares Yuyang Securities Other 0.24% 3,000,000 0 0 Investment Funds 108 Portfolio of National Other 0.24% 3,000,000 0 0 Social Security Fund NATWEST SECURITIES Foreign shares 0.23% 2,870,539 0 0 HONG KONG LIMITED Xinyue Co.,Ltd. Foreign shares 0.22% 2,818,087 0 0 Top 10 holders of unconditional shares Name of shareholders Unconditional shares Type of shares Guangdong Communication Group 102,171,883 RMB Common shares Co.,Ltd 102 Portfolio of National Social Security 14,099,813 RMB Common shares 13 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot Fund Guangdong Yuecai Turst Investment 12,174,345 RMB Common shares CO., Ltd. China Life insurance Co., Ltd.—Dividend-Individual 4,999,958 RMB Common shares dividend-005L-FH002 Shen Yuyang Securities Investment Funds 3,000,000 RMB Common shares 108 Portfolio of National Social Security 3,000,000 RMB Common shares Fund NATWEST SECURITIES HONG KONG Foreign shares placed in domestic 2,870,539 LIMITED exchange Foreign shares placed in domestic Xinyue Co.,Ltd. 2,818,087 exchange Foreign shares placed in domestic KGI ASIA LIMITED 2,336,317 exchange Foreign shares placed in domestic Lu Weiqiang 2,028,448 exchange Guangdong Communication Group Co., Ltd. is the parent company of Guangdong Expressway Co., Ltd.and Xinyue Co., Ltd. Guangdong Guanghua Expressway Co., Ltd. Notes to the related is subsidiary company of Guangdong Expressway Co., Ltd , 108 portfolio of National relationship between the Social Security Fund, 102 portfolio of National Social Security Fund are all managed by shareholders or their Boshi Fund Management Co., Ltd. It is unknown whether there is relationship between concerted action other shareholders and whether they are persons taking concerted action specified in the Regulations on Disclosure of Information about Change in Shareholding of Shareholders of Listed Companies. 2．Brief introduction of the controlling shareholder Guangdong Communication Group Co., Ltd. is the largest shareholder of the Company. legal representative: Zhu Xiaoling. Date of establishment: August 23, 2000. As of the end of 2007,Registered capital: RMB 19.8 billion. It is a solely state-owned limited company. Business scope：equity management, organization of asset reorganization and optimized allocation, raising funds by means including mortgage, transfer of property rights and joint stock system transformation, project investment, operation and management, traffic infrastructure construction, highway and railway project operation and relevant industries, technological development, application, consultation and services, highway and railway passenger and cargo transport, ship industry, relevant overseas businesses. 14 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot 3. Brief introduction of the controlling shareholder (1) Information of the actual controller: State-owned Assets 100% Guangdong 40.60% Guangdong Expressway 4.No other situation of legal person shareholders holding more than 10% (including 10%) shares. 5. The equity of non-current shareholders in the top 10 shareholders and the conditions for limit on sale. (As of December 31,2008) Unit：Share Shares with Newly added Condi No Conditioned sharesholder conditioned Date when trading allowed tradable shares tions subscription Guangdong Communication 408,243,602 1 February 17,2009（Note） 408,243,602 Group Co., Ltd. Guangdong Expressway 16,775,435 （Not 2 February 17,2009（Note） 16,775,435 Co., Ltd. e） Guangdong Guanghua 3,242,107 3 February 17,2009（Note） 3,242,107 Expressway Note ：Guangdong Communication Group Co., Ltd. and its related companies Guangdong Expressway Co., Ltd. and Guangdong Guanghua Expressway Company made the following commitment: The non-negotiable shares of the Company will not be listed, traded or assigned within 12 months from the date of obtaining the right of listing and negotiation. Such shares shall not be listed or traded within twenty four months after the expiration of the said period of 12 months. 15 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot On December 11, 2008, Guangdong Communication Group Co., Ltd.and Xinyue Co., Ltd. increased part of A-shares of the Company through Shenzhen Stock Exchange Trading System, and they intended to increase A-shares and B-shares of the Company through Shenzhen Stock Exchange Trading System in the future 12 months, the total increase ratio no more than 2% of the total shares of the company (including shares increased). According to rules, during the period, Guangdong Transportation Group Co., Ltd. and the related companies Guangdong Provincial Expressway and Guangdong Guanghua Expressway Company could not cancel the relevant procedures of sale limit. 16 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot IV Directors, Supervisors ,Senior Executives and Employee 1. Status of Directors, Supervisors and Senior Executives (1)Basis status The total amount of remunerati Whether on Receive received Remunera Shareholdi from the Shareholdi tion from Beginning date Expiration date ng at Reason of the Company Name Position Sex Age ng at a of office term of office term year-begin change in the year-end sharehold ning report er or other period related (RMB’000 -parties 0) （Before tax） No Zhou Board December December Male 56 0 0 change 36.36 No Yuming chaiman 20,2007 20,2009 Director and No Li December December general Male 48 0 0 change 36.36 No Xiyuan 20,2006 20,2009 Manager Director, Deputy No Xiao December December General Male 45 20,043 20,043 change 30.55 No Laijiu 20,2006 20,2009 Manager,Chi ef accountant Yang No December December Miaojia Director Male 56 0 0 change 6.00 Yes 20,2006 20,2009 n Luo No December December Yingshe Director Male 55 0 0 change 6.00 Yes 20,2006 20,2009 ng No Wang December December Director Male 45 0 0 change 6.00 Yes Tao 20,2006 20,2009 Li No December December Wenzhe Director Male 57 23,400 23,400 change 6.00 No 20,2006 20,2009 ng 17 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot Independen No He December December t director Male 56 0 0 change 6.00 No Qiang 20,2006 20,2009 Xiang Independen No Fem December December Tiang t director 52 0 0 change 6.00 No ale 20,2006 20,2009 ui Independen No Wang May December t director Male 47 0 0 change 3.50 No Jian 20,2008 20,2009 Independen No Wei May December t director Male 44 0 0 change 3.50 No Minghai 20,2008 20,2009 Chairman of Chen No the December December Chuxua Male 42 5,987 5,987 change 0.00 Yes Supervisory 12,2008 20,2009 n Committee t Supervisor No Yang Fem December December 30 0 0 change 0.00 Yes Xiaohua ale 12,2008 20,2009 Zhong Supervisor No December December Zhen Male 49 0 0 change 30.56 No 20,2006 20,2009 guang Supervisor No Fem December December Li Mei 39 123,205 123,205 change 23.74 No ale 20,2006 20,2009 Supervisor No Tu Fem December December 49 56,887 56,887 change 21.65 No Huiling ale 20,2006 20,2009 Deputy No Hou December December General Male 55 0 0 change 30.56 No Jingfang 20,2006 20,2009 Manager Wang Deputy No December December Chunhu General Male 45 0 0 change 30.56 No 20,2006 20,2009 a Manager Chief economic No Yun December December engineer,C Male 54 20,043 20,043 change 30.56 No Wujun 20,2006 20,2009 hief legal adviser No Wang Senior December December Male 44 0 0 change 30.56 No Jiachen engineer 20,2006 20,2009 Zhuo Secretary Fem December December No 36 0 0 23.19 No Jiang of the ale 20,2006 20,2009 change 18 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot board of directors Total - - - - - 249,565 249,565 - 367.65 - By the end of 2008, the directors, supervisors and senior managers did not implement equity incentives. (2) Particulars about directors and supervisors holding positions at corporate shareholders Whether receiving Name of corporate Term of Name Position remuneration or shareholders office subsidy Supervisor , Chief Guangdong Communication Yang Miaojian legal adviser, director 2005 till now Yes Group Co., Ltd. of Law affair Dept. September Guangdong Communication Full-time field Chen Chuxuan 2008 till Yes Group Co., Ltd. supervisors now Guangdong Communication Full-time field October 2008 Yang Xiaohua Yes Group Co., Ltd. supervisors till now Board chaiman, October Guangdong Expressway Luo Yingsheng Secretary of Party 2006 till Yes Co., Ltd committee, now October Guangdong Yuecai Turst Wang Tao Board chaiman 2005 till Yes Investment CO., Ltd. now (3)Main work experience of directors, supervisors and senior executives for the recent five years: Mr.Zhou Yuming, the chairman of the board of the Company, party secretary, a bachelor's degree holder , senior engineer, from March 2003 to September 2007, served as the directors, member of the party committee, general manager of Guangdong Communication Industrial Investment company, and on September, 2007 he was transferred to the Company and also concurrently served as the chairman of Guangfo Expressway Co., Ltd. vice chairman of Guangdong Guanghui Expressway Co., Ltd.and vice chairman of Kangda Company. Mr. Li Xiyuan, Now serves as director General Manager , Member of Party committee of the company, a post-doctoral senior engineer of professor level, From September 2001 to August 2006, served in Guangdong Jingtong Highway Construction Group as the party secretaries, the director,general manager and Member of Party committee . He has worked at the Company since August 2006 and now concurrently serves as the chairman of the board of directors of Guangdong Fokai Expressway Company , vice chairman of the board of directors of Guangdong Jiangzhong Expressway Co., Ltd. and vice chairman of the board of directors of Ganzhou Gankang Expressway Co., Ltd.. 19 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot Mr. Xiao Laijiu , Now serves as director, deputy general manager and chief accountant of the Company. a bachelor's degree holder , senior accountant. He has worked at the Company since 1992 . from 2003 to March 2006 also served as the secretary of the Board of Directors. He now concurrently serves as director of Guangdong Fokai Expressway Co., Ltd and director of Guangfo Expressway Co., Ltd. Mr. Yang Miaojian, Now serves as director of the company, a senior engineer with Master's degree.He has served as director of Investment Dept and General economy engineer of Guangdong Communication Group since 2005, He now serves as supervisor ,General Law counselor and Law affair Dept of Guangdong Communication Group Co., Ltd. . Mr. Luo Yingsheng now serves as director and senior political engineer of the Company. Junior college, graduate, He has worked at the Guangdong Road-bridge Construction Development Company from 2001 to 2006. He once served as secretary of Party committee, vice board chairman & secretary of Party committee, board chairman & secretary of Party committee.He now serves as the chairman and secretary of Party committee of Guangdong Expressway Co., Ltd. Mr. Wang Tao, a postgraduate, now serves as director of the Company,. Economic engineer , He served as deputy general manager, vice chairman of the board of directors, General manager and chairman of the board of directors of Guangdong Yuecai Trust Investment Company from 1995 to 2005. He has served as vice Secretary of Party committee ,General Manager and board chairman of Guangdong Yuecai Trust Investment Co., Ltd. since 2005. Mr. Li Wenzheng, Malaysian citizens, Malaysia chartered Accountants, a master degree holder, Economic engineer .now serves as director of the Company. He has served as group finance director of Malaysia Yibao Engineering Co., Ltd., and concurrently serves as executive director of Malaysia Youlejia Group and Danan Group. Mr.He Qiang, a bachelor's degree holder, now serves as independent director of the Company. Since 1985, he has worked at Central Financial University.He now is Professor, Superintendent, Doctoral tutor doctor tutor and concurrently serves as independent director of Jinan Diesel Engine Co., Ltd., Hunan Dongting Aquaculture Co., Ltd., Zhanjiang Harbour Co., Ltd. Ms Xiang Tiangui, a bachelor's degree holder, now serves as independent director of the Company. Since 1994, she has been a partner of Beijing Changan Law Office and practiced law. Mr.Wei Minghai, Now serves as independent director of the Company, a Doctor, principal assistant of Zhongshan University, accounting professor and PhD supervisor. Also served as the member of the Ministry of Finance Internal Control Standards Committee, the member of the Ministry of Finance , the executive director of the China Accounting Society; the chairman of the board of the of Guangzhou Baoli Real Estate Company and Zhongshan University Industry Group (Zhongshan University 20 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot Holding). Mr. Wang Jian, an independent director of the Company, with post-graduate qualification. The member and vice general manager of the current party committee of Guangdong Hengjian Investment Co., Ltd., also served as arbitration member of Guangzhou Arbitration Commission, and the independent director of Fuhua Group Company in Zhuhai Special Economic Zone. Mr. Chen Chuxuan, the Chairman of the Supervisory Board of the Company, Management Master, senior accountant and senior economist. From September 2001 to September 2008, he served as chief accountant of Guangdong Guanyue Road & Bridge Co., Ltd. In March 2008, he was dispatched to Guangdong State-owned Assets Commission to concurrently serve as deputy chief of Work Division of Supervisory Committee. From September 2008 until now, he served as dispatched chairman of the supervisory committee of Guangdong Communication Group Co., Ltd. Ms. Yang Xiaohua, the supervisor of the Company, a bachelor's degree holder, Accountant, From June 2002 to October 2008, She served as Cherk , Assistant senior director and Deputy Manager of Enterprise Dept of Guangdong Nanyue Logistics Co., Ltd., From October 2008 until now, she served as dispatched chairman of the supervisory committee of Guangdong Communication Group Co., Ltd. Mr. Zhong Zhenguang, a junior college graduate and political engineer, now serves as deputy secretary of Party committee, secretary of discipline committee and chairman of labor union of the Company, He has worked at the company since December 2003 to Now. and concurrently serves as chairman of the supervisory committee of Guangdong Gankang Expressway Co., Ltd , Director of Fokai Expressway Co., Ltd.. Ms Li Mei, the supervisor of the Company, a junior college graduate and political engineer, now serves as supervisor, office director, director of Party Office and member of discipline inspection committee. She has worked at the Company since 1998 to now and concurrently serves as chairman of the supervisory committee of Guangdong Guanghui Expressway Co.,.Ltd. Ms Tu Huiling, the supervisor of the Company,a Master's degree holder and senior political engineer, now serves as supervisor and vice chairman of labor union of the Company. She has worked at the Company since 1992. Mr. Hou Jingfang, a bachelor of engineering, senior economic engineer and senior political engineer, From November 2003 to May 2005,he serves as general manager of Guanghua Expressway Company. he has worked at the Company since June 2005 to now. He now concurrently serves as board chairman of Guangdong Express Technology Investment Co., Ltd. and vice board chairman of Huiyan Expressway Co., Ltd.and director of Zhaoqing Yuezhao Expressway Co., Ltd.. 21 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot Mr. Wang Chunhua, a senior engineer and senior economic engineer with Master's degree, now serves as deputy general manager of the Company. He once served as deputy director of Guangdong Communication Group Co., Ltd. From April 2001 to August 2006, He has worked at the Company since September 2006, He now concurrently serves as vice chairman of the board of directors of Jingzhu Expressway Guangzhu Section Co., Ltd. and director of Guangdong Guanghui Expressway Co., Ltd. Mr. Yun Wujun, a senior accountant with bachelor's degree, now serves as chief economic engineer and chief legal adviser of the Company. He has worked at the Company since 1995. He now concurrently serves as vice chairman of the board of directors of Guangdong Maozhan Expressway Co., Ltd., chairman of the supervisory committee of Guangdong Fokai Expressway Co., Ltd. and independent director of Guangdong Kaiping Chunkui Co., Ltd. Mr. Wang Jiachen, a senior engineer with Bachelor's degree, now serves as chief engineer of the Company. He has worked at the Company since 2000, He now concurrently serves as director of Guangdong Jiangzhong Expressway Co., Ltd. and board chairman of Zhaoqing Yuezhao Highway Co., Ltd. Ms Zuo Jiang, a senior economic engineer with master's degree, She has worked at the Company since 1994 and once served manager of Securities Dept. (4). Annual recompense (1) The decision-making procedures, and determining basis and the actual payment of the salaries of directors, supervisors and Senior Executives staff. During the reporting period, the annual salary of directors, supervisors, senior management is described in the table of basic information of directors, supervisors, Senior Executives staff. . （2）The remuneration of members of the fifth board of directors and supervisory committee was examined and determined at the first Provisional shareholders' general meeting in 2006. The remuneration of senior executives of the Company is determined according to the appraisal result under assets operation responsibility system in current year. Refer to the table of basic information of directors, supervisors and senior executives for details of annual remuneration obtained by directors, supervisors and senior executives from the Company in the report period. (5) Name of the directors, supervisors or senior executives who were elected or left their posts in the report period and the reason therefor 1. Mr. Liu Qin and Ms He Hongdi had served as independent directors of the Company for 6 years, in accordance with the "independent director system" of the Company, would no longer serve as independent directors. By May 20, 2008, the 2007 annual General shareholders meeting considered and adopted the election of Mr. Wang Jian and Mr. Wei Minghai as independent directors of the company. whose term of office is the same with that of the members of the fifth board of directors 22 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot 2. Due to work reasons, Mr. Li Dongshan resigned from his position as supervisor and chairman of the supervisory board of the company, and Mr. Wu Jianxiang resigned from the position as supervisor. Adopted in the third third Provisional general meeting of shareholders on December 12, 2008, Mr. Chen Chuxuan and Ms Yang Xiaohua were elected as supervisors of the fifth board of supervisors. whose term of office is the same with that of the members of the fifth board of directors 3.In the fifth meeting of the fifth board of supervisors on December 12, 2008, Mr. Chen Chuxuan was elected as the Chairman of the fifth Supervisory Board. (II) Particulars about employees As of the end of 2008, the Company had 1369 on-the-job employees. The particulars are as follows: Proportion Divided by function Number of persons Managerial personnel 256 18.70% Toll collectors 920 67.20% Road service personnel 47 3.40% Logistical personnel 146 10.70% Total 1369 100.00% Divided by professional title Senior professional title 35 2.56% Semi-senior professional title 82 5.99% Junior professional title 85 6.21% Other 1167 85.24% Total 1369 100.00% Divided by academic qualification Holders of master's degree or 1.53% above 21 Graduates of regular university 157 11.47% Graduates of junior colleges and 46.17% secondary technical schools 632 Other 559 40.83% Total 1369 100.00% 13 retired employees for whom it bore expenses. V Administrative Structure (1).Administrative Particulars The Company has constantly improved its corporate governance structure, established modern enterprise system and standardized its operation strictly according to the requirements of new Company Law, Securities Law and relevant laws and regulations 23 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot of CSRC. In the special activities of governance of listed companies organized by CSRC in 2007, the Company satisfactorily completed relevant work on time. The Rectification Report on Special Activities of Corporate Governance was examined and adopted at a provisional meeting of the fifth board of directors of the Company and published on Securities Times, Shanghai Securities Daily, China Securities Daily, Hong Kong Commercial Daily and www.cninfo.com.cn on October 31, 2007. In the report period, According to relevant requirements of (2008) No. 27 Announcement of CSRC and the Notice of Satisfactorily Performing the Work Concerning Preventing Reoccurrence of Problem of Listed Companies' Fund Occupation (Guangdong Zheng Jian (2008) No. 92), In the report period, the Company carried out continuous rectification according to the matters listed in the Rectification Report on Special Activities of Corporate Governance. The particulars are reported as follows: (I) The status of completion of rectification of problems within specified time limit The corporate governance rectification report did not mention any problem to be rectified within specified time limit. (II) The rectification effect of the problems to be improved continuously and the Company's improvement plan in the next stage The corporate governance rectification report for 2007 mentions some problems to be continuously improved. The problems, relevant rectification measures and notes are reported as follows: 1. The problems to be improved continuously found by the Company in self inspection Problem 1: The board of directors of the Company only established remuneration and appraisal committee. The board of directors will add necessary special committee according to the Company's actual conditions. Rectification measure and effect: On February 2, 2008, the Company established audit committee of the board of directors and formulated rules of procedure of audit committee after examination and adoption by the provisional meeting of the fifth board of directors the Company. Establishing audit committee of the board of directors further strengthened the decision making and supervision function of the board of directors of the Company and contributed to further improving corporate governance structure. Problem 2: As the investment subjects of newly constructed for-profit expressways are basically determined through public tendering and bidding, the Company may face the competition from related parties under the controlling shareholder when striving for new investment projects in the future. Rectification measure and effect: May 28, 2008, Guangdong Communication Group Co., Ltd., the controlling shareholder of the Company, issued the Letter of Commitment of Avoiding Horizontal Competition to the Company again. The content of commitment is as follows: (1) If Guangdong Communication Group and/or any of its controlled subsidiaries except Guangdong Expressway assign any toll highway, bridge or tunnel and relevant auxiliary facilities or rights and interests to any party other than Guangdong Communication Group and its controlled subsidiaries, Guangdong Expressway shall enjoy preemptive right under same conditions under the premise of being permitted by relevant laws and regulations; 24 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot (2) If Guangdong Communication Group and/or any of its controlled subsidiaries invest in and construct expressways that are parallel with or have the same direction with the expressways held by Guangdong Expressway within the range of 20 km on each side of such expressways, Guangdong Expressway will enjoy priority of investment under the premise of being permitted by relevant laws and regulations except the projects whose investment subjects are definitely designated by the department in charge of expressway construction. As of December 31, 2008, The Company did not face the competition from any related party under the controlling shareholder when striving for new investment projects. 2. The problems to be improved continuously found by Guangdong Securities Regulatory Bureau in site inspection Problem 1: The personnel files of the Company's senior executives were not kept by the Company itself. The independence of the Company awaits further improvement. The latest statement on rectification: The Company is completely separated from the controlling shareholder in respect of business, personnel, assets, organs and finance. The chairman of the board of directors, general manager, deputy general managers, board secretary and the person in charge of financial affairs of the Company all work on full-time basis and do not work at any shareholder or any related enterprise on part-time basis. However, the personnel files of the senior executives of the Company as a listed company held by the state are kept by the unit in charge according to relevant regulations concerning state-owned companies and state-held companies. This needs improvement and further coordination between national regulatory authorities in respect of policy and regulations. The Company reported the opinion of Guangdong Securities Regulatory Bureau to higher authority and hoped that national regulatory authorities should coordinate with each other in respect of relevant policies and regulations. Problem 2: The format of the employment contract of some senior executives of the Company was non-standardized. Latest statement on rectification: The Company signed labor contracts with employees strictly according to regulations including Labor Law and Labor Contract Law. The labor contracts between the Company and employees were signed according to the Labor Contract prepared by Guangdong Labor and Social Security Department. Part of its content and format is different from those of the Employment Contract put forward by Guangdong Securities Regulatory Bureau. In terms of Labor Contract, the Company's contract format is not non-standardized. The Company defined the content involving appointment form and term put forward by Guangdong Securities Regulatory Bureau in the form of official document or board resolution. Problem 3: The voting method of board meetings of the Company needed further improvement. Rectification measure and effect: The mode of voting when the board of directors of the Company examines proposals has changed from vote by show of hands to vote in writing, which further enhanced the traceability of board resolutions. To sum up, the governance structure and mechanism of a listed company needs long-term efforts and unceasing improvement. The company will take this opportunity, standardize the sytem construction as a breakthrough, to overecome the weak standandization, self discipline, innovation, and development. (II) Particulars about duty performance of independent directors 25 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot In the report term, Four current independent directors of the Company, i.e., He, Qiang, Xiang Tiangui, Wang Jian and Wein Minghai and Two predecessor Liu Qin and He Hongdi, performed duties strictly according to rules and regulations including Guidelines for Governance of Listed Companies, Independent Director System, the Articles of Association of the Company and Rules of Procedure of the Board of Directors. In the report period, 4 independent directors actively attended board meetings and shareholders' general meetings held by the Company, made independent, objective and fair judgment and gave professional opinions on the Company's daily operation and important investment decisions, expressed independent opinions on the special statement on fund transfer between the Company and its related parties and the Company's external guarantee, related transactions, appointment and dismissal of senior executives and earnestly safeguarded the interests of the Company and all shareholders based on their expertise and ability.In the report term, Four independent directors of the Company, i.e., Liu Qin, He Hongdi, He Qiang and Xiang Tiangui, performed duties strictly according to rules and regulations including Guidelines for Governance of Listed Companies, Independent Director System, the Articles of Association of the Company and Rules of Procedure of the Board of Directors. In the report period, 4 independent directors actively attended board meetings and shareholders' general meetings held by the Company, made independent, objective and fair judgment and gave professional opinions on the Company's daily operation and important investment decisions, expressed independent opinions on the special statement on fund transfer between the Company and its related parties and the Company's external guarantee, related transactions, appointment and dismissal of senior executives and earnestly safeguarded the interests of the Company and all shareholders based on their expertise and ability. (1).Attendance of board meetings by independent directors Name The times of Times of Times of Times of Remarks holding of attendance in attendance absence board person by proxy meetings in this year Liu Qin 11 4 0 0 Note 1 He Hongdi 11 4 0 0 Note 1 He Qiang 11 9 2 0 Note 2 Xiang 11 10 1 0 Note 3 Tiangui Wang Jian 11 7 0 0 Note 4 Wei Minghai 11 7 0 0 Note 4 Note 1：Mr. Liu Qin and Ms He Hongdi have acted as independent directors of the Company for six years in succession. According to relevant regulations of CSRC, they shall no longer act as independent directors of the Company. As Mr. Yu resigned from the position of independent director at the provisional meeting of the fifth board of directors on April 25, 2008, he did not attend the remaining board meetings in the report period. Note 2：Mr. Heqiang did not attend the provisional meetings of the fifth board of directors 26 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot held on February 29, 2008 and April 25, 2008 in person due to attending a meeting of CPPCC and he authorized independent director Xiang Tiangui to attend the meetings and vote on his behalf. Note3：Ms Xiang Tiangui did not attend the 8th meeting of the fifth board of directors held on June 12, 2008 due to performing other official duties and she authorized independent director Mr. He Qiang to attend this meeting and vote on her behalf. Note4：As examined and adopted at 2007 annual shareholders' general meeting held on May 20, 2008, Mr. Wang Jian and Mr. Wei Minghai were elected as independent directors of the Company. Two independent directors attended the remaining board meetings in the report period in person. (2). Objection made by independent directors to relevant matters of the Company In the report period，4 independent directors of the Company did not make objection to the proposals of the board of directors of the Company in the year. (III) Notes to the separation of the Company from its controlling shareholder in respect of business, personnel, assets, organs and finance The controlling shareholder of the Company is Guangdong Communication Group Co., Ltd. It holds 510,415,485 shares of the Company，which account for 40.60% of the total share capital of the Company. The Company has sound corporate administration structure. It has been completely independent of its controlling shareholder in respect of business, personnel, assets, organs and finance and has independent and complete business and the ability of independent operation. 1. Independent business The Company is mainly engaged in the toll collection and maintenance of Guangfo Expressway and Fokai Expressway. Meanwhile, it has invested in or holds Shenzhen Huiyan Expressway Co., Ltd., Guangdong Maozhan Expressway Co., Ltd., Guangdong Guanghui Expressway Co., Ltd., Jingzhu Expressway Guangzhu Section Co., Ltd., Zhongjiang Expressway Co., Ltd.,Zhaoqing Yuezhao Highway Co., Ltd., Zhaoqing Yuezhao Highway Co., Ltd. ,Ganzhou Gankang Expressway Co., Ltd., Ganzhou Kangda Expressway Co., Ltd.and Guangdong Express way Technology Investment Co., Ltd. The Company has outstanding main operation, independent and complete business and the ability of independent operation. All business decisions of the Company were made independently, being completely separated from the shareholder with actual control. Related transactions were carried out in light of the principle of fair transaction, which did not harm the interests of the Company and other shareholders of the Company. The content of related transactions was fully, timely and accurately disclosed, which did not have negative influence on the Company. 2. Complete assets The relationship of the Company's property right is clear. The assets injected by shareholders in the Company are independent and complete and have clear property right. All capital was paid up and relevant formalities of property right change were settled. 3. Independent personnel As for personnel relationship, the general manager, deputy general managers, the secretary to the board of directors and financial controller of the Company were full-time employees and received salary from the Company, who did not concurrently hold positions at the parent company. All directors and supervisors of the Company were elected through legal procedure. The 27 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot general manager, deputy general managers, chief accountant, chief economic engineer and chief engineer were directly appointed by the board of directors. Other managerial personnel of all levels were directly appointed by the general manager. The Company owns independent power of personnel appointment and removal. 4. Independent finance The Company, including subsidiaries and branches, established independent accounting department，independent accounting system and regulations on financial management. The Company independently opened bank account and did not deposit funds in the accounts of the finance company or settlement center of the majority shareholder. The Company independently paid tax. The Company's financial decisions were independently made. The majority shareholder did not interfere with the use of funds by listed companies. 5. Independent organization The board of directors, the supervisory committee and and other internal organs of the Company operated independently. Its organs are complete and independent. 28 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot (IV)Establishment and improvement of internal control system. (1) Summary of internal control 1. Structure of internal control of the company shareholders’ general Meeting remuneration Board of Directors Supervisory Committee audit committee Operating team Securities affair Dept Management Dept Financial Management Dept Infrastructure Management Dept Audit Dept Service Dept Human Resource Dept. Department of party work Law affair Dept Labor Union Investment Development Dept. 2. Establishment and improvement of internal control system. By following scientific, standardized, and transparent basic principles, according to actual situation of the company, in accordance with the principle of clear responsibilities and rational structure and corresponding power and responsibility, the company set up internal operating management institution, established a set of business processes covering all aspects of management and regulations, promoted standard operations by determining business and persons according actual situation and operating according regulations, laid solid basis for the long-term sustainable development. 29 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot Company Charter is the basic rules to conduct internal control management. In addition, the general shareholders meeting of the Company strictly operate in accordance with the Rules for General Shareholders Meeting; the Board of Directors complies with "Rules for the Board of Directors", and actively uses the power of independent directors and the board of directors and the relevant special systems and plays a decision-making role on major operation and management issues of the company. The company had successively set up the internal management system in eight aspects: investment management, financing management, security services, business management, project management, financial audit management, human resources management executive, administrative management, legal affairs management, a total of 118 items, which cover all the systems like information disclosure, investor relations management, fund-raising use and internal control required by China Securities Regulatory Commission and Shenzhen Stock Exchange. 3. The building of internal audit departments responsible for supervision and inspection in the company. The special internal audit department responsible for supersion and inspection is the audit & inspection department, equipped with four full-time staff, the information as follows: No Name Sex Age Position Title Education Minister of Peng Senior 1 Female 46 Supervision of Undergraduate Xiaofang Accountant Audit Vice Minister of Undergraduate Li 2 Female 35 Supervision of Auditors Haifeng Audit Undergraduate Liang Business 3 Male 28 Auditors Liang Manager Political engineer， Chen Business 4 Female 32 Economic Graduate Ting Manager engineer 4. General evaluation on internal control in 2008 In 2008, the company got improved in setting of professional organizations in the Board of Directors and system building. The Board of Directors established the Audit Committee which was composed of three directors, and developed "business rules for Audit Committee of the Board of Directors and "Annual Report Work Procedures of the Audit Committee of the Board of Directors. The Board of Directors of the Company also developed Annual Report Work System for Independent Directors. The Board of Directors of the Company holds that the existing internal control system of the 30 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot Company conforms to the relevant laws and regulations of our country and requirements of regulatory authorities as well as the actual situation of the Company and therefore has its rationality, legitimacy and validity. The Company has been strictly implementing its internal control system without material defects in the management control of subsidiaries and internal control of connected transactions, external guarantees, use of raised funds, substantial investments and information disclosure and realized its scheduled goal. With the further business development of the Company, changes of external environment and requirement for raising the management level, the internal control system of the Company must still be strengthened and perfected continuously. 31 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot (2) Critical control activities 1. Control structure and shareholding ratio of holding subsidiaries Guangdong Provincial Expressway Development Co.Ltd 75% 75% 95% Guangfo Expressway Co., Ltd. Guangdong Fokai Expressway Co., Ltd. Guangdong Expressway Technology Investment Co., Ltd. 2. Self-check of internal control (i) Control of holding subsidiaries The Company has set down control policies and procedures of holding subsidiaries and appointed senior management including directors, supervisors, general managers, deputy general managers or finance directors to holding subsidiaries, and it requires holding subsidiaries to annually present an annual business plan which can not be implemented until it is deliberated and passed by the Top Management Team of the Company; the holding subsidiaries have established the system of reporting major matters and deliberative procedures to duly report to responsible persons of the Company in charge of these major matters significant business and financial matters and other information that have potential significant influence on transaction prices of corporate stocks and their derived varieties as well as present major matters to the Board of Directors or shareholders' meeting of the Company for deliberation in strict compliance with the provisions of authorization; the holding subsidiaries are required to duly present their important documents such as resolutions of Board of Directors and shareholders' meeting to the Secretary of the Board of Directors of the Company and inform it of any matters that have potential significant influence on transaction prices of corporate stocks and their derived varieties; the holding subsidiaries are required to punctually submit their monthly and quarterly reports including operating reports, tolls and traffic volume statistics, balance sheets, income statements, cash flow statements and reports of funds and guarantees provided to others; the Company has established the performance appraisal system for its holding subsidiaries. 32 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot (ii) Internal control of connected transactions The internal control of connected transactions of the Company follows the principle of good faith, equality, free will, impartiality, openness and justness without prejudice to any interests of the Company and its shareholders. In accordance with the relevant laws, administrative regulations, department rules and related provisions of Listing Rules of Shenzhen Stock Exchange, the Company has clearly defined the examination and approval authorities of its shareholders' meeting and Board of Directors for connected transactions and stipulated the deliberative procedures and requirements of withdrawing from the voting process. When deliberating the connected transactions, the Board of Directors must obtain the prior approval of independent directors. Before making a judgment, the independent directors of the Company may engage an intermediary agency to issue a special report as their basis of judgment. In addition, in the daily control, the Company must determine and duly update a list of related parties with reference to the provisions of Listing Rules to ensure the authenticity, accuracy and completeness of this list of related parties. In the report period, the Company has an actual significant connected transaction occurring, that is, the Company authorized Guangdong Provincial Expressway Co., Ltd. to construct and manage the expansion project of Guangfo Expressway and reconstruction and expansion projects of Fokai Expressway. This connected transaction conforms to the related provisions of Measures for Administration of Expressway Construction Market issued by the State Ministry of Transport with the purpose of improving the project quality and controlling the project cost by making full use of rich experience and outstanding professional forces of Guangdong Provincial Expressway Co., Ltd. in the construction and management of expressway projects so as to ensure the better progress in construction of these projects as well as the interests of investors and project benefits. In terms of the examination and approval procedures, the Board of Directors and shareholders' meeting of the Company deliberated the authorized construction and management of two (reconstruction) expansion projects successively based on the type of connected transaction and the related directors all withdrew from the voting process, therefore, the deliberative procedures conform to the laws and regulations such as the Company Law and Securities Law and the relevant provisions of the Articles of Association of the Company; this connected transaction accords with the principle of impartiality, openness and justness without prejudice to any interests of the Company and its shareholders. The Company has no non-operational funds misappropriation by its controlling shareholders and related parties, and independent directors and supervisors of the Company quarterly refer to the fund transfers between the Company and its related parties to check whether any funds, assets and other resources of the Company are misappropriated and transferred by controlling shareholders and related parties of the Company. (iii) External guarantees The internal control of external guarantees of the Company should follow the principle of 33 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot legitimacy, prudence, mutual benefit and security with the strict control of guarantee risks. In accordance with the relevant laws, administrative regulations, department rules and related provisions of Listing Rules, the Company has clearly defined the examination and approval authorities of its shareholders' meeting and Board of Directors for external guarantees and stipulated that its external guarantees must require the other party to provide the counter guarantees. In the report period, the Company and its holding subsidiaries have no external guarantees provided by them. (iv) Use of raised funds The Company has established the fund-raising management system which clearly defines the deposit, examination and approval, use, change, supervision and responsibility investigation relating to raised funds. (v) Substantial investments The substantial investments of the Company should follow the principle of legitimacy, prudence, security and validity that controls the investment risks and focuses on investment benefits. The Company has clearly defined the examination and approval authorities of its shareholders' meeting and Board of Directors for substantial investments in the Articles of Association of the Company and set down the corresponding deliberative procedures. The Company has appointed its Investment Development Department to take charge of special research and evaluation of feasibility, investment risks and investment returns of substantial investment projects of the Company. In the report period, the Company has successfully carried out a substantial investment and commenced on preparations for but finally terminated a substantial investment. (1)On January 11, 2008, the 2008 First Provisional Shareholders Meeting agreed the company to invest 30% equity in Ganzhou Kangda Expressway Co., Ltd., and invested 30% equity in Ganzhou Gankang Expressway Co., Ltd.. The investments had successfully implemented. (2) On June 12, 2008, the company held the eighth meeting of the fifth meeting of the Board of Directors and adopted the "Major Asset Restructure of Guangdong Expressway Development Company Limited issuing shares to Guangdong Provincial Expressway Company Limited". Yue Expressway intended to non-publicly issue A-shares to Guangdong Provincial Expressway Co., Ltd. and purchase the 100% equity of Guangzhou Shenfo Expressway Co., Ltd. ("target assets"). Since making the above resolution by the Board of Directors, the company actively promoted the process of the above-mentioned reorganization matters, and the provincial SASAC made reply to the operation of capital operation program, and the provincial government, Province National Land Agency supported the exemption of land application fee and authorized the operation. However, on August 20, 2008 and September 18, 2008, the National Department of Transportation issued "Approaches for transferring rights and interests of toll road" ("Approach "), as well as "Notice on strengthening management of rights and interests of toll roads"("Notice"). 34 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot Some restrictive provisions on relevant methods of transferring rights rights and interests of roll roads as well as price payment methods, resulting in the company was unable to acquire target assets in the method of non-public shares. Ultimately, on October 29, 2008 the Board of Directors determined to stop the implementation of the major restructuring events. (6). Disclosure of information The company set up information disclosur management system and reporting system of internal internal major information, making clear of the scope and content of significant information, and designated the secretary of the Board of Directors as the main contactor for information releasing. According to the regulations in "Fair Information Disclosure and Guidelines for Listed Companies in Shenzhen Stock Exchange", "Guidelines for management of investor relations for listed companies in Shenzhen Stock Exchange", the company standardized the reception, on-line show and other investor relations, ensuring the fairness of information disclosure. (3). Problems and improvement plans in key control activities The Company continued to develop and grow, business has been expanding from Guangdong to other provinces. At the same time, the internationalization, marketing and standardization of of the domestic securities market, and new products and new regulations were produced continuously. All of these made higher requirement on the company and its internal control. The internal control systems of the company needed to be continuously upgraded and improved. The learning of new regulations and new products needs to be further strengthened. Currently, the new Company Income Tax Law and labor & contract law has already implemented, and the China Securities Regulatory Commission and the Shenzhen Stock Exchange have also introduced new regulations, criterias and new market products. All of these need to be studied and mastered. The company will take manay forms to organize the directors, supervisors and senior managers and the related business department to carry out special and systematic learning and improve knowledge and management level. In the reporting period, the China Securities Regulatory Commission and Shenzhen Stock Exchange and related staff did not make public blame. The company did not employ external audit institutions to issue openions on self-evaluation of internal control of the company. (V) Appraisal of Senior Executives in the reporting period and the establishment and implementation of related incentive mechanisms and incentive systems. The Company implemented position responsibility to every senior management, and made clear regulations on job standards, appraisal standards. The Salary and Evaluation Commission of the board of directors conducted assessment to the senior management staff. The senior management staff shall report to worker representatives and accept comments. If not qualified in successively 2 years, they will be demoted or dismissed. 35 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot VI. Brief Introduction of Shareholders' General Meeting In the report period, The Company held 4 shareholders meetings，Relevant particulars are as follows: 1. The first provisional shareholders' general meeting in 2008 was held on January 11, 2008. The resolutions of this meeting were published on Securities Times, China Securities Daily, Shanghai Securities Daily, Hong Kong Commercial Daily and www.cninfo.com.cn on January 12, 2008. 2. The Second provisional shareholders' general meeting in 2008 was held on February 3, 2008. The resolutions of this meeting were published on Securities Times, China Securities Daily, Shanghai Securities Daily, Hong Kong Commercial Daily and www.cninfo.com.cn on February 5, 2008. 3. 2007 annual shareholders' general meeting was held on May 20, 2008. The resolutions of this meeting were published on Securities Times, China Securities Daily, Shanghai Securities Daily, Hong Kong Commercial Daily and www.cninfo.com.cn on May 21, 2008. 4. The Second provisional shareholders' general meeting in 2008 was held on December 12,2008. The resolutions of this meeting were published on Securities Times, China Securities Daily, Shanghai Securities Daily, Hong Kong Commercial Daily and www.cninfo.com.cn on December 13,2008. 36 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot VII.Report of the Board of Directors (I). Review of the Company's operating status in the report period 1. Overall operating status in the report period In 2008, influenced by the international financial crisis, the domestic economy had a greater change. Though the expressway industry had less impact from the crisis, the car flow and traffic income declined inevitably. Especially in the second half year, the traffic incomes of each expressway dropped slightly, opposite to the increasing direction. It is an alarming signal. At the same time, part of expressway controlled or participated by the company implemented the "Green Passage" policy from Jan 26，2008 that the vehicles transporting fresh farm products were free for passing. The traffic income was negatively affected. In 2009, the "Green Passage" policy continues to implement, and the negative effects will continue. The expansion project and maintenance project undertaking by Guangfo Expressway and Fokai Expressway controlled by the company also affected traffic income. For all the reasons above, the operating income and business profit and net profit of the company in 2008 declined for a certain. Unit:RMB Year 2008 Year 2007 Increase/Decrease （%） Business Income 937,278,307.42 1,113,184,855.26 -15.80% Business profit 559,568,021.76 793,229,345.06 -29.46% Net profit attributable 398,260,910.28 493,661,982.44 -19.33% to shareholders of the listed company (II).Main operation and operating status The Company is an infrastructure industry, with main business in developing and operating expressway and big bridges. It is one of the main institutions of developing expressway and big bridge in Guangdong Expressway System. The expressway industry is the industry helped by government. The operating of the company is benefited from the state policy. During the reporting period, the business income from main business projects was RMB 937,278,307.42, operating profit RMB 559,568,021.76 , which mainly from business charges in expressway and big bridges, the specific structure as follows: Table of the status of main operation in terms of business line In terms Rate of Increase/decrease Increase/decrease Increase or of Income Cost of profit from of income from of cost of main decrease of business from main main main main operation operation over rate of line and operation operation operation over the previous the previous year profit from product (%) year (%) (%) main 37 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot operation over the previous year (%) Tolls 93,009.90 38,146.60 38.18% -15.48% 16.03% 5.91% income Table of the status of main operation in terms of product Tolls 93,009.90 38,146.60 38.18% -15.48% 16.03% 5.91% income （III）In the report period,Assets constitutes and change influencing Unit：RMB Items of December 31,2008 December 31,2007 Proportion of changed Balance Sheet Monetary capital 350,765,725.76 190,665,302.76 83.97% Accounts 12,654,511.88 22,736,135.67 -44.34% receivable Accounts in 85,087,576.90 7,049,638.50 1106.98% advance Long-term equity 2,196,261,073.68 1,852,483,899.54 18.56% investment Construction in 1,083,046,214.97 420,770,409.92 157.40% progress Short-term loans 300,000,000.00 100,000,000.00 200.00% Long-term loans 2,348,324,803.54 988,324,803.54 137.61% Items of Profit December 31,2008 December 31,2007 Changes proportion statement Financial 118,254,313.15 101,820,214.90 16.14% expenses Income tax 65,039,571.54 150,856,791.72 -56.89% expenses Influencing factors are as follows: 1. Monetary capital increase was mainly due to: this year, net cash flow generated from business activities decreased RMB 101.0271 million, net cash flow generated from investing activities decreased RMB 1111.8735 million, and the net cash flow from fund-raising increased RMB 1673.6565 million, the combined effects lead to cash flow increase RMB 460.7559 million. 2. The main reason for the reduction of accounts receivable: the settlement of interconnection charges was timely, so the traffic income at year end reduced. 38 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot 3. The main reason for the increase of prepayments: the prepayment for construction project of expansion of Guangfo and Fokai Expressway and materials increased. 4. Main reasons for the increase of long-term equity investment: the parent company increased investment RMB 216.25 million to Ganzhou Kangda Expressway Co., Ltd.,RMB 105 million to Ganzhou Gankang Expressway Co., Ltd. and the changes of adjustment of losses and gains of long-term equity investment of the participating company. 5. Mains reasons for the increase of projects under construction: RMB 778.04 million was increased to Guangfo and Fokai expansion construction and Fokai repair project and other projects under construction had completed and transferred as fixed assets. 6. Reasons for the increase of short-term borrowings: Guangfo Expressway Co., Ltd. and Guangdong Fokai Expressway Co., Ltd. increased RMB 100 million short-term borrowings respectively. 7. Reasons for the increase of long-term borrowings: Guangdong Fokai Expressway Co., Ltd. of increased net long-term borrowing RMB 1210 million and Guangfo Expressway Co., Ltd. newly increased long-term borrowing 150 million. 8. Reasons for the increase of financial costs: (1). The borrowing principals of Guangfo Expressway Co., Ltd. and Guangdong Fokai Expressway Co., Ltd. increased slightly over the same period in last year; (2). The increase of loan interest rate in the first half of 2008. 9. Reasons for the reduction of income tax: the main reasons are: (1) The total profit realized in the current period decreased slightly over in the same period of last year; (2) In the current period, Fokai Expressway Co., Ltd. and Technology Company paid the corporate income tax according to the 25% tax rate. （IV）Composition of the Company's cash flows from business activities, investing activities and financing activities Unit：RMB Item Year 2008 Year 2007 Changed rate Net cash flows from operating 589,798,119.24 690,825,203.69 -14.62% activities Net cash flows from investing -1,236,480,797.13 -124,607,312.07 892.30% activities Net cash flows from financing 806,814,969.31 -866,841,485.99 193.08% activities Influencing factors are as follows: 1. Funds raising: Funds inflow of the Company RMB 4456.1739 million year in 2008. Cash inflow from operating activities was RMB 1187.3419, in which, the cash from labor 39 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot provision was RMB 946.9221 million , mainly from the traffic income from Guangfo and Fokai Expressway. Cash received from other iperating activities was RMB 240.4198 million , mainly: (1). Guangdong Fokai Expressway Co., Ltd.: A. Contract performance payment and bid bond from construction units RMB 69 million and the reserve fund returned; B. None-busines income, interest income and other incomes. (2). The parent company: A. Received A-share interest, small share interests and A-share commission charge returned RMB 7.53 million; B. Interest income and other incomes, etc.; C. Received rent and other advance payments. (3) Guangfo Expressway Co., Ltd.: this year, received the RMB 93.74 million advance payment from Zhujiang Jijian Investment Co., Ltd. and the rest charge from Yayao Bridge project. Cash inflow from investing activities was RMB 320.5071 million , mainly received the dividends RMB 60 million,RMB 179.1945 million and RMB 71 million respectively from Huiyan Expressway Co., Ltd., Guanghui Expressway Co., Ltd. and Guangzhu Expressway Co., Ltd. Cash inflow from financing activities was RMB 2948.3248 million , mainly: (1). Fokai Expressway Co., Ltd.borrowed money RMB 2508.3248 million from the bank in the current period; (2) Guangfo Expressway Co., Ltd. borrowed money RMB 440 million from the bank in the current period. 2. Use of the funds. Capital outflow in 2008 totally RMB 4296.0416 million. Cash outflow from operating activities was RMB 597.5438, major projects: (1). Payment on purchasing merchandise and receiving services RMB 166.0950 million; (2). Money paid to staff and paid for staff RMB 108.9912 million; (3). Paid various taxes and fees RMB 129.2024 million; (4). Payment relating to operating activities RMB 193.2552 million, mainly: A. Other management payments besides the money paid to staff and paid for staff; B. Guangfo Expressway Co., Ltd. paid RMB 93.74 million to Zhujiang Construction Investment Company, and payment for project guarantee and other expenses; C. Fokai Expressway Co., Ltd. paid RMB 20 million to Changda Company for Jiujiang Bridge Repair Project, and paid deposit fees and cash deposits. Cash outflow for investing activities RMB 1556.9879 million: (1). Cash paid for the purchase of fixed assets, intangible assets and other long-term assets RMB 1235.7368 million, mainly: A. Guangfo Expressway Co., Ltd. paid RMB 70 million for expansion project, RMB 3.71 million for Hengsha dormitory, RMB 7.73 million for Shayong toll station, RMB 2.5 million yuan for Yayao Charging system; B. Fokai Expressway Co., Ltd. paid the fund for expansion projects RMB 544 million, for overhaul RMB 347 million, for repair RMB 32 million and Jiujiang Bridge restoration; (2). Cash investment: invested RMB 216.25 million to Ganzhou Kangda Expressway Co., Ltd. for the parent company and invested RMB 105 million to Ganzhou Gankang Expressway Company. Cash outflow for financing activities RMB 2141.5098 million, mainly: (1) Cash paid for debt RMB 1568.3248 million, namely, Fokai Expressway Co., Ltd. repaid RMB 1378.3248 million to Provincial Expressway Company for shareholder loan and Guangfo Expressway Co., Ltd. repaid 40 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot bank loan RMB 190 million; (2). Cash paid for dividend, profit and interest RMB 573.1850 million, mainly: Fokai Expressway Co., Ltd.: A, Distribution of dividends to minority shareholders RMB 46.3012 million; B, Paid the Provincial Expressway Company RMB 122.5358 million for shareholder interests and bank loan interest. (2) Guangfo Expressway Co., Ltd.: A, distribution of dividends to minority shareholders RMB 83.7275 million; B, payment of interest RMB 17.22 million. (3) the parent company: distribution of dividends to the shareholders of the Company RMB 303.40 million. (V). Analysis of operating status and results of main controlled subsidiaries and joint ventures 1.In the report period, the vehicle traffic and toll income of the controlled subsidiaries and joint ventures of the Company are as follows: Year-on-y ear Volume of increase or Year-on-year vehicle traffic in decrease Toll income in increase or 2008 (%) 2007 (RMB’0000) decrease (%) Guangfo Expressway 31,487,878 -16.89% 30,056.33 -19.95% Fokai Expressway 23,486,816 9.66% 62,302.85 -10.28% Jiujiang bridge - - Huiyan Expressway 27,010,840 6.82% 30,331.99 0.02% Maozhan Expressway 3,559,090 7.93% 33,361.52 -1.13% Jingzhu Expressway 29,721,443 2.90% 104,456.78 3.94% Guangzhu Section Guangzhao 9,385,249 8.21% 17,889.40 -0.68% Expressway Guangzhao First-class 13,241,712 9.64% 11,007.89 7.00% Highway Guanghui Expressway 18,442,600 12.85% 124,063.92 11.88% Jiangzhong 16,595,686 15.13% 23,821.58 12.27% Expressway Kangda Expressway 439,336 -- 1,498.82 -- In 2008, Guangfo Expressway, Fokai Expressway, Huiyan Expressway(Longgang-Heao), Maozhan Expressway(Xiaojinkou-Luogang), Guanghui Expressway implemented the toll-free policy for fresh agricultural products (that is, free passage for transporting of live farm products), and the toll income was affected for a certain. (1). In the first half year, the car flow and toll income of Guangfo Expressway Co., Ltd.declined dramatically, mainly due to: influenced by the distribution of Foshan Yihuan, Guangfo New line,Guihe Road, Guidan Road and Xierhuan; the Xiebian Station and Dali Station were influenced for Extension construction; in the first harl year, affected by the construction of Guangshen expressway, the cars heading for Foshan were deverted to Jiangzhong Express; the implementation of "Green Passage" free-toll policy. (2). The car flow in Fokai expressway Co., Ltd.increased, mainly due to the break of Jiujiang Bridge, the vehicles were diverted to Fokai expressway Co., Ltd.but the distance was short, so the toll income did not increased significantly. In contrast, influenced by the "Green Passage" policy 41 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot and the diversion of Xierhuan, and influence from the overhaul in fourth quarter (currently completed), Fokai toll income declined dramatically. (3). Huiyan Expressway and Maozhan Expressway were influenced by the "Green Passage" policy, and the increase in toll income was ess than the increase in car flow. (4). Some sections of Guanghui Expressway implemented "Green Channel" policy, but because from October 26, 2007 onwards, some sections increased the toll due to the construction of 6 lanes from 4 lanes, so toll income still had a certain growth. (5). Guangzhu East section of Jingzhu Expressway, Guangzhao Expressway, Guangzhao Highway and Jiangzhong Expressway do not have implement the "Green Passage" free-toll policy, car flow and toll income revenued to maintain steady growth. Of which, Guangzhao Expressway, the car flow in Guangzhao and Jiangzhong Expressway increased dramatically, so the toll income increase was slower than the increase of car flow. (6). In first half year 2008, the company participated shares in Kangda Expressway, Gankang Expressway and Ganjiang Bridge in Ganzhou in Jiangxi province. Among them, Kangda Expressway had completed in December 2007 and the currently it was under operation. Gankang Expressway and Ganjiang Bridge was currently under construction. 2. Business situation of main subsidiaries and share participating companies (1) Guangfo Expressway Co., Ltd. The Company holds 75% equity of that company. The registered capital of Guangfo Expressway Co., Ltd. was 0.2 billion yuan, with main business in operating Guangfo Expressway Co., Ltd.(starts from Hengsha, Guangzhou, ends in Xiebian, Foshan. Total length 15.7 kilometers): construction, maintenance management, vehicle rescue and cleaning. For the year 2008, the total assets, net assets, income from main operation, profit from main operation and net profit of Guangfo Company are RMB 4,167,067,254.86, RMB 1,299,376,204.43, RMB 624,522,442.37, RMB 208,560,557.10 and RMB140,991,963.18 respectively. (2) Guangdong Fokai Expressway Co., Ltd. The Company holds 75% equity of this company. The registered capital of the company is RMB 1.108 billion. It is engaged in operation and management of Fokai Expressway Co., Ltd., supporting salvage, maintenance and cleaning, supply of parts and components, etc. For the year 2008, the total assets, net assets, income from main operation, profit from main operation and net profit of Fokai Expressway Co., Ltd. are RMB 4,167,067,254.86, RMB 1,299,376,204.43, RMB624,522,442.37,RMB 208,560,557.10 and RMB 140,991,963.18 respectively. (3) Guangdong Expressway Technology Investment Co., Ltd. The Company holds 95% equity of this company. The registered capital of Guangdong Expressway Technology Investment Co., Ltd. is RMB 100 million. It is engaged in investing in science and technology industries. Investment in technical industries and provision of relevant consulting services, research and development of lighting technology, energy saving and storage technology, photovoltaic technology of solar energy and production and sales of relevant products, design, production , release and agency of all kinds of domestic and foreign advertisements, construction and maintenance management of highway projects and domestic trade. （excluding illegally， or 42 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot prohibited and restricted by law products）For the year 2008, the total assets, net assets and net profit of this company were RMB 24,787,979.77, RMB 9,257,665.62 and RMB -671,104.41 respectively. (4) Shenzhen Huiyan Expressway Co., Ltd. The Company holds one third equity of this company. The registered capital of the company is RMB 36 million. The company is engaged in the organization and management of the construction of the main line of Shenzhen section of Huiyan Expressway, its operation, management and maintenance after its completion, collection of toll and road service management, the construction management of road, bridge and culvert projects and engineering consultation..For the year 2008, the total assets, net assets, income from main operation, profit from main operation and net profit of this Company were RMB 603,726,769.95, RMB 570,787,319.86, RMB 306,027,397.16, RMB226,312,785.14 and RMB 187,029,583.20 respectively. (5) Guangdong Maozhan Expressway Co., Ltd. The Company holds 20% equity of this company. The registered capital of the company is RMB 1.12 billion. The company is engaged in operation, maintenance and management of Dianbai-Zhanjiang Expressway and relevant supporting facilities. For the year 2008, the total assets, net assets and net profit of this Company were RMB 2,852,821,608.81, RMB 612,269,253.03, RMB 10,469,289.30 respectively. (6) Jingzhu Expressway Guangzhu Section Co., Ltd. The Company holds 20% equity of this company. The registered capital of the company is RMB 580 million. The company is engaged in the operation and management of Guangzhou-Zhuhai Expressway and provision of supporting services including fueling, salvage and supply of parts and components. For the year 2008, the total assets, net assets, income from main operation, profit from main operation and net profit of this Company were RMB 4,362,066,257.57, RMB 1,535,156,303.07, RMB 1,044,567,723.90, RMB 563,934,023.50 and RMB 541,538,820.82 respectively. (7) Zhaoqing Yuezhao Highway Co., Ltd. The Company holds 25% equity of this company. The registered capital of the company is RMB 818.3 million. It is engaged in the construction, operation and management of Guangzhao Expressway, old highways and their supporting facilities, service facilities and integrated projects. For the year 2008, the total assets, net assets, income from main operation, profit from main operation and net profit of this Company were RMB 2,416,785,864.63, RMB858,812,242.34, RMB273,691,285.00, RMB 23,455,828.09 and RMB 18,226,821.24 respectively. (8) Guangdong Guanghui Expressway Co., Ltd. The Company holds 30% equity of this company. The registered capital of the company is RMB 2.352 billion. It is engaged in the investment in and construction of Guanghui Expressway Co., Ltd. and supporting facilities, the toll collection and maintenance management of Guanghui Expressway. For the year 2008, the total assets, net assets, income from main operation, profit from main operation and net profit of this Company were RMB 6,654,896,901.62, RMB2,427,425,076.02, RMB1,243,005,577.00, RMB 505,416,172.04 and RMB 383,657,456.37 respectively. (9) Guangdong Jiangzhong Expressway Co., Ltd.. The Company holds 15% equity of this company. The registered capital of Jiangzhong Co. is RMB 1.015 billion . It is engaged in investing in, constructing, operating and managing Jiangzhong Expressway Co., Ltd. and phase-II project of Jianghe Expressway and developing supporting projects. This project is currently operating earlier，Although toll fee income is growing steadily，still can not be the level of profitability. For the year 2008, the total assets, net assets and net profit of this company were 43 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot RMB 2,795,270,504.80, RMB 894,758,305.63 and RMB -24,549,344.93 respectively. (10). Ganzhou Kangda Expressway Co., Ltd. The company holds 30% equity of that company. The registered capital of Kangda Company was RMB 0.6 billion , with operating scope in construction, operation and management of expressway projects; highway maintenance; Advertising; wholesale and retail of construction machinery equipments and accessories (the above-mentioned projects should be in accordance with state special provisions). this project was established this year, toll fee income still located at a lower level.For the year 2008, the total assets, net assets and net profit of this company were RMB 1,922,655,922.76, RMB 476,983,162.47 and RMB -123,016,837.53 respectively. (11). Ganzhou Gankang Expressway Co., Ltd. The company holds 30% equity of Gankang Company. Registered capital of Gankang Company was RMB billion , business scope: project of Ganzhou-dayu expressway (Maodian-Sanyi) and the construction and management of Ganjiang Highway project; earth mining and sale; highway maintenance; advertising; service facilities; building materials, decoration materials, metal materials, wholesale and retail of construction machinery and equipments and accessories (the above-mentioned projects should be in accordance with state special provisions). Two projects of the company are still under construction. For the year 2008, the total assets and net assets of this company were RMB 886,183,441.51 and RMB 350,000,000.00 respectively. (II) Forecast of the Company's future development 1. Development trend of expressway industry According to the Network Plan for State Expressway adopted by the State Council in 2004, by the year 2010, China will build 5~55,000 km, 60% to 65% of the total length of the expressway. State highway network will achieve the goal of "East network, contacting the middle, connecting the west". The eastern area will basically form an expressway network, the Yangtze River Delta, Pearl River Delta, and around Bohai region will form a better inter-city highway network; external link in the central area will be built, center cities in the area will have expressway communication; and eight inter-provincial highways will be constructed in western regions and will achieve the goal of east-west connection and reaching rivers and sea. Guangdong Province is the frontier province of economic development in China, and the rapid economic growth promoted the need for expressways and provided rare opportunity for large road enterprises. Expressways in Guangdong by the end of 2003 were 2,303 kilometers and increased to 3,520 kilometers in 2007. At the same time, the road network in Guangdong had initially formed. The need for highway transportation had increased dramatically. But comparing with developed areas, the scale of expressway in Guangdong was still small, and complete network had not formed yet and had not met the requirement for the realization of well-off society and modernization. 2.Development opportunities and challenges In 2009，In the whole context of macro-economic downturn, the company will face a severe test. First of all, the expansion project of Fokai Expressway will be undertaking in 2009. Flow distribution measures will be taken by section closing to do the construction, so the traffic ability will be affected and the toll income of Fokai Expressway will be affected greatly. Secondly, the pressure of capital expenditure will be large, the expansion of Guangfo highway share-controlled 44 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot by the company, the overhaul and expansion of Fokai expressway, the repair of Jiujiang Bridge, and the the construction of Gankang Epxressway, Ganjiang highway bridge, Guangzhao expressway second phase which are share-participated by the company will face greater financial pressure. on the other hand, factors resulting from policies still persist, in the whole year 2009, Guangfo expressway, Fokai expressway, Huiyan expressway, Maozhan expressway and Guanghui expressway (from Lougang to Xiaojing section) share-controlled or share-participated by the company will still implement "Green Passage" policy, so that the toll income will continue to be restricted. The unfavorable factors make the operating status seem unoptimistic. The face of difficulties and challenges, the board of directors of the company will fully mobilize the enthusiasm and creativity to work, facing up with difficulties, focusing on the central work of production and operation, overcoming unfavorable factors, paying close attention to increase revenue and reduce expenditure, and striving to achieve the operational objectives in 2009: operating income X yuan, operating cost X yuan, so that Yue Expressway will go through the difficulties smoothly. At the same time, work will be undertaking from the following aspects: 1. Continue to strengthen the strategy development research of the company. Vigorously promote the basic work of strategy development research. Carry out investigational research analysis according to problems existing in the development of the company, and provide general plans for the development of the company in the future years; 2. Continuously explore new programs for capital operation. Under the new policy situation, positively analyze the practical capital operation program, with efforts to resolve problems relating to policies and strive to restart a win-win capital operation program for the Transportation Group and Yue Expressway; 3. Give full play to the advantage of financing to complete the work of issuing corporate bonds, reduce financial costs and alleviate financial pressure. 4. Pay attention to the expansion construction of Guangfo and Fokai expressway. Carry out supervisory negotiation on the Guangfo and Fokai expansion project according to job responsibilities of the supervisory team. Actively participate the implementation of Fokai expansion organizational program, seek balance in flow, quality and less distribution and reduce operation loss to the company due to construction. 3.The planned fund use and fund source in 2009. Unit：RMB’0000 Item Amount Guangfo Expansion Project 5,751.38 Fokai Expansion Project 23,678.81 Kangda Expressway Project 16,008.00 Fixed assets Purchase and other expenses 146,485.26 Debt repayment and interest 110,185.00 The funds required for the above projects will be solved with own funds and through debt financing. 5.Analysis of operating risk 45 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot marco economy aspect: the changes of the economic cycle will lead to the changes of economic activity demand for transport capacity, and further cause the change of traffic flow and fee gross. What our company runs( expressway car flow in traffic and charged for the use of the expressway） closely related to the economic vitality in guangdong province。 If effected by the international financial crisis and the slowing down domestic growth factor, expressway business may become recession and will have adverse effect to our company;s profession, profit situation and financial position. Macroeconomic policy: Rules for Highway Management regulates that: the charge period of the operating highway is determined according to principle of recovering the investment with reasonable returns, no longer than 25 years; the longest charge period of the operating highway in the central and western provinces and autonomous regions, no longer than 30 years. The company needs to conduct reasonable arrangement on the charge highway projects under operation or under construction or planning to invest, so that the projects can be well matched to each other to maintain the operating ability. III. Particulars about investments (I) The Company did not use raised fund in the report period. (II) The actual progress of important investment projects utilizing non-raised funds 1. The Company signed the Contract for Assignment of Equity of Ganzhou Kangda Expressway Co., Ltd. with Ganzhou Expressway Co., Ltd. in December 2007. The Company acquired 30% equity of Ganzhou Kangda Expressway Co., Ltd. held by Ganzhou Expressway Co., Ltd. at RMB 172.4327 million and contributed RMB 43.8184 million to Kangda Expressway Co., Ltd. as capital. On January 11, 2008, the first provisional shareholders' general meeting of the Company in 2008 examined and adopted the resolution concerning this investment. The procedure of industrial and commercial registration of shareholder change of Ganzhou Kangda Expressway Co., Ltd. was completed on April 25, 2008. The Company started to calculate investment income from May 1. It paid RMB 216.2511 million to Ganzhou Expressway Co., Ltd. as full payment for equity assignment and the capital to be contributed. In the report period, The Company's investment income from Ganzhou Kangda Expressway Co., Ltd. was RMB -36.9051 million. 2. The Company signed the Contract for Share Capital Increase of Ganzhou Gankang Expressway Co., Ltd. with Ganzhou Expressway Co., Ltd. in December 2007. The Company purchased 30% equity of Ganzhou Gankang Expressway Co., Ltd. The capital to be contributed will be used to construct Ganzhou-Dayu Expressway (Maodian-Sanyi Section) and Ganzhou Highway Bridge. The amount of the capital to be contributed by the Company is expected to be RMB 289.3002 million. On January 11, 2008, the first provisional shareholders' general meeting of the Company in 2008 examined and adopted the resolution concerning this investment. The procedure of industrial and commercial registration of shareholder change of Ganzhou Gankang Expressway Co., Ltd. was completed on April 16, 2008. As of December 31, 2008, The Company had accumulatedly increased capital RMB 105 million in total. 46 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot IV. Daily work of the Board of Directors (1) Meetings of the board of directors in the reporting period and the resolutions. In the reporting period, the board of directors of the Company held a total of 11 meetings, and the main contents and resolutions are as follows: 1. The provisional meeting of the fifth board of directors was held in the morning on January 17, 2008 in the manner of voting by correspondence， The announcement of resolutions of this meeting were published on Securities Times, China Securities Daily, Shanghai Securities Daily and Hong Kong Commercial Daily and www.cninfo.com.cn on January 18,2008. 2. The provisional meeting of the fifth board of directors was held in the morning on February 2, 2008 in the manner of voting by correspondence， The announcement of resolutions of this meeting were published on Securities Times, China Securities Daily, Shanghai Securities Daily and Hong Kong Commercial Daily and www.cninfo.com.cn on February 5,2008. 3. The provisional meeting of the fifth board of directors was held in the morning on February 29, 2008， The announcement of resolutions of this meeting were published on Securities Times, China Securities Daily, Shanghai Securities Daily and Hong Kong Commercial Daily and www.cninfo.com.cn on March 4,2008. 4. The provisional meeting of the fifth board of directors was held in the morning on April 25, 2008 ， The announcement of resolutions of this meeting were published on Securities Times, China Securities Daily, Shanghai Securities Daily and Hong Kong Commercial Daily and www.cninfo.com.cn on April 29,2008. 5. The provisional meeting of the fifth board of directors was held in the morning on June 12, 2008， The announcement of resolutions of this meeting were published on Securities Times, China Securities Daily, Shanghai Securities Daily and Hong Kong Commercial Daily and www.cninfo.com.cn on June 13,2008. 6. The provisional meeting of the fifth board of directors was held in the morning on July 3, 2008 in the manner of voting by correspondence， The announcement of resolutions of this meeting were published on Securities Times, China Securities Daily, Shanghai Securities Daily and Hong Kong Commercial Daily and www.cninfo.com.cn on July 4,2008. 7. The provisional meeting of the fifth board of directors was held in the morning on July 29, 2008 in the manner of voting by correspondence， The announcement of resolutions of this meeting were published on Securities Times, China Securities Daily, Shanghai Securities Daily and Hong Kong Commercial Daily and www.cninfo.com.cn on July 30,2008. 8. The provisional meeting of the fifth board of directors was held in the morning on August 15, 2008，11 directors were supposed to attend the meeting and all of them were actually present. The directors present at this meeting exceeded half of all directors. The meeting complied with relevant provisions of the Company Law and the Articles of Association of the Company and the Rules of Procedure of the board of directors of the Company. the meeting examined and adopted the Semiannual Report for 2008. According to relevant regulations of Shenzhen Stock Exchange, the disclosure of this meeting was exempted. 47 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot 9.The provisional meeting of the fifth board of directors was held in the morning on October 24, 2008 in the manner of voting by correspondence，11 directors were supposed to attend the meeting and all of them were actually present. The directors present at this meeting exceeded half of all directors. The meeting complied with relevant provisions of the Company Law and the Articles of Association of the Company and the Rules of Procedure of the board of directors of the Company. the meeting examined and adopted the Third quarter Report for 2008. According to relevant regulations of Shenzhen Stock Exchange, the disclosure of this meeting was exempted. 10.The provisional meeting of the fifth board of directors was held in the morning on October 29, 2008 in the manner of voting by correspondence， The announcement of resolutions of this meeting were published on Securities Times, China Securities Daily, Shanghai Securities Daily and Hong Kong Commercial Daily and www.cninfo.com.cn on October 30,2008. 11.The provisional meeting of the fifth board of directors was held in the morning on November 26, 2008 in the manner of voting by correspondence， The announcement of resolutions of this meeting were published on Securities Times, China Securities Daily, Shanghai Securities Daily and Hong Kong Commercial Daily and www.cninfo.com.cn on November 27,2008. (2) The Board of Directors implements the resolutions of the general shareholders meeting. 1. Implementation of the programs of profits distribution of and public reserves transferring to capital: the 2007 general shareholders meeting adopted the resolution of 2007 profit distribution: the total capital 1,257,117,748 shares at the end of 2007 and frist quarter in 2008 as the base number, every 10 shares distributed cash dividends2.40 yuan (include tax). The profit distribution program was completed in August 2008. 2. In 2008, the third temporary general meeting authorized the Board of Directors to issue RMB bonds. The Board of directors of the Company had arranged business team and related business staff and offered application materials of issuing company bonds to China Securities Regulatory Commission. After being approved by China Securities Regulatory Commission, the Board of directors would complete the rest procedures. （3）Audit Committee, Remuneration Committee 1. The Board of Director has an Audit Committee, composing three directors as members, two of whom are independent directors, the chairman is the independent director Wei Minghai, the summary information report as follows: In accordance with the relevant provisions in the China Securities Regulatory Commission [2008] 48 File and Shenzhen Stock Exchange "Notice on How to Do a Good Job in 2008 Annual Report" and the memorandum of annual report work, the Board of Auditors launched a series of annual audit work for 2008 annual audit, the specific circumstances as follows: (1) On January 5, 2009, before the certified public accountants for annual audit accessed to the site, the Audit Commission and Chief Accountant of the CPA Firm determined through consultation the schedule of audit work of financial statements in this fiscal year. 48 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot (2) The certified public accountants audited financial statements prepared by the Company and formed their written opinions. On January 5, 2009, the certified public accountants audited financial statements submitted by the Finance Department of the Company and gave the following audit opinions: ① the Company selected and applied proper accounting policy, made reasonable accounting estimates and prepared these financial statements free of any material misstatements and omissions found; ② no major shareholders have been found to have misappropriated any funds of the Company; ③ the Company has not been found to have provided any external guarantees in violation of rules and done any abnormal connected transactions; ④ the financial statements of the Company may be submitted to the CPA Firm for annual audit. (3) The formal commencement on the audit work on the site by the CPA Firm and the pressing of the Audit Commission are set forth as follows: after the work team of the CPA Firm formally commences on the audit work on the site, the Audit Commission sent a Letter of Pressing for Audit Work twice successively, requesting the CPA Firm to do the audit work according to the master schedule of audit work and report the related work progress to the Audit Commission. (4) On February 17, 2009, the certified public accountants audited the financial statements in 2008 which were submitted by the Finance Department of the Company and on which the certified public accountants for annual audit gave their preliminary audit opinions as well as formed the following written audit opinions: ① the certified public accountants for annual audit did the audit work of financial statements of the Company in 2008 in strict accordance with the standards for audit business; ② during the preparation of annual audit report, the certified public accountants for annual audit and the Audit Commission had an effective communication, fully took the Audit Commission’s advice and came to an agreement on all material respects of the annual audit. ③ the annual financial statements accompanied by the preliminary audit opinions given by the certified public accountants are relatively complete and free of any material omissions as well as fairly reflected in all material respects the financial position of the Company ended 31 December 2008 and production and operation results and cash flow of the Company in 2008. (5) On February 19, 2009, the certified public accountants audited the financial statements in 2008 which were submitted by the Finance Department of the Company and on which the certified public accountants for annual audit gave their standard unreserved audit opinions as well as gave the following written audit opinions: ① the financial statements of the Company are a true, correct and complete reflection of the whole position of the Company, and the certified public accountants agree that these financial statements in 2008 which were prepared by the Company and audited by the certified public accountants for annual audit are submitted to the Board of Directors for deliberation; ② after having followed up and checked the annual audit work of financial statements of the Company in 2008 that was done by Shu Lun Pan Yangcheng Certified Public Accountants Co., Ltd. and gone through the financial audit report issued by it, we believe that Shu Lun Pan Yangcheng Certified Public Accountants Co., Ltd. engaged by the Company fulfilled its duties scrupulously, followed the independent, objective and impartial professional standards and protected the interests of the Company and its shareholders in terms of accounting profession, therefore, we suggest the Company re-engaging Shu Lun Pan Yangcheng Certified Public Accountants Co., Ltd. as its audit institution in 2009. 49 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot 2. The Board of Directors has a salary committee, composed of three directors, two of them are independent directors, The independent director He Qiang served as the chairman. During the reporting period, according to the relevant laws and regulations of China Securities Regulatory Commission, Shenzhen Stock Exchange and internal control system, and "implementation rules for the salary and appraisal commission of the board of directors of the company, the salary and appraisal commission made audit on the salary disclosed by directors, supervisors and senior management, and make the following audit opinions: The decision-making procedure of salary of directors, supervisor and senior management complied with the relevant regulations; the release of salary of directors, supervisors and senior management complied with the regulations of the salary system approved by the board of directors of the company; the salary of directors, supervisors and senior management disclosed in 2008 annual report was true and accurate. (6). Profit distribution plans and the plans of transfer of reserve to common shares Lixin Yangcheng Certified Public Accountants audited the final accounts of the Company for February 2009 in accordance with Chinese accounting standards and issued auditor's report. As audited by Lixin Yangcheng Certified Public Accountants, the net profit for the parent company in the consolidated statements for 2008 is RMB 398,260,910.28 ,the net profit for the parent company in statements for 2008 is RMB 480,694,272.53 and the accumulative distributable profit in parent statements is RMB 661,652,925.73. As examined and approved by the board of directors, the Company was approved to distribute profit according to the net profit for the parent company. The plan is as follows: 1. According to the company law and Company rule regulation, 10% of the net profit for the parent company for 2008 (RMB 480,694,272.53), i.e. RMB 48,069,427.25, is to be allocated for statutory common reserve fund.10% of the net profit for the parent company for 2008 (RMB 480,694,272.53), i.e. RMB 48,069,427.25, is to be allocated for statutory common reserve fund. 2. Based on the combined distribution of the profit RMB 301,708,259.52 for 2007 and the first quarter of 2008, the profit for 2008 will be further distributed as follows: RMB 125,711,774.80 is to be allocated for the funds for dividend distribution for 2008. With the total share capital at the end of 2008, i.e., 1,257,117,748 shares, as the base, cash dividend of RMB 1.00 (including tax) is to be distributed for every 10 shares. Cash dividends of RMB 125,711,774.80 will be distributed in total and the remaining undistributed profit is RMB 186,163,464.16 will be carried forward for distribution in the next year. The foreign exchange translation rate for the cash dividends payable to shareholders of B shares and overseas corporate shares is to be determined according to the bank's selling rate of HKD:RMB exchange rate published by the foreign exchange purchase bank on the date of foreign exchange purchase within two months after 2008 annual shareholders' general meeting makes the resolution for dividend distribution. (VII)The newspapers selected by the Company and statutory website for information disclosure The Company selected Securities Times, China Securities Daily, Shanghai Securities Daily, Tak Kung Pao and Hong Kong Commercial Daily as newspapers for information disclosure and www.cninfo.com.cn as the website for information disclosure. 50 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot VIII.Report of the Supervisory Committee I. Work of the Supervisory Committee In the report period, the Company held 5 meetings of supervisory committee in total. The particulars of the meetings are as follows: (1) The forth meeting of the fifth Board of Supervisors was held on February 29, 2008. The meeting discussed and approved Work Report of the Board of Supervisors in 2007, Financial Accounts Report in 2007, Profit Allocation Plan in 2007, and Annual Report and its summary in 2006, and approved to submit to 2007 general shareholders meeting for approval, and examined and discussed the resolutions made in the 7th meeting of the fifth board of directors on the Resolution on Drawing Preparations for Bad Account from Receivables and the Report on Self-evaluation of the Company's Internal Control, the board of supervisors agreed to the above resolutions, made the following specific comments: The announcement of resolutions of this meeting were published on Securities Times, China Securities Daily, Shanghai Securities Daily and Hong Kong Commercial Daily on March 4,2008. （2）The provisional meeting of the fifth supervisory committee was held in the morning on April 25, 2008， The meeting Examining and adopting the proposal Profit allocation Plan in 2007 and first quarter Report in 2008 . The announcement of resolutions of this meeting were published on Securities Times, China Securities Daily, Shanghai Securities Daily and Hong Kong Commercial Daily on April 29,2008. （3）The provisional meeting of the fifth supervisory committee was held in the morning on August 15, 2008 by mean of telecommunication voting. 5 supervisors were supposed to attend the meeting and all of them were actually present. The meeting examined and adopted the Semiannual Report for 2008 and its Summary According to relevant regulations of Shenzhen Stock Exchange, the disclosure of this meeting was exempted. (4). The provisional meeting of the fifth board of directors was held on October 24, 2008， The meeting Examining and adopting the proposal concerning the report for the third quarter of 2008 The meeting examined and adopted the Proposal for Electing the Chairman of the Fifth Supervisory Committee and Proposal for Replacing Part of Supervisors. The announcement of resolutions of this meeting were published on Securities Times, China Securities Daily, Shanghai Securities Daily and Hong Kong Commercial Daily on Octomber 27,2008. 51 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot （5）The 5th meeting of the Fifth supervisory committee held on December 12, 2008, The meeting examined and adopted the Proposal for Electing the Chairman of the Fifth Supervisory Committee. The announcement of resolutions of this meeting were published on Securities Times, China Securities Daily, Shanghai Securities Daily and Hong Kong Commercial Daily on December 13,2008. II.Independent Opinions of the Supervisory Committee (1) The company had strictly complied wit the requirement of Company Law, Securities Act and Company Constitution and relevant laws and regulations of China Securities Regulatory Commission, and had constantly improved the corporate governance structure. Under the leading of the board of directors, the operating team of the company completed all the operational tasks, and was affirmed and recognized in the stock market. company board of directors can execute scientific decision base on general meeting of shareholders resolution， can guide and lead the management team accomplish all operation and management task together and correctly. The operating team adopted democratic decision-making methods, fully listened to various views, decision-making procedures were conducted strictly in accordance with the Company Constitution and the authorization of the Board of Directors, at the same time, established a sound internal control system, system of reception and promotion, rules for information disclosure management, system of independent directors, management system of funds raising, general manager work rules, management system of related transactions and other systems. The directors and general managers were not found the acts of violation of the law, regulations, company constitutions or damage of company interests. After checking and inspection, and did not find out company board member, manager have done any thing that is illegel, or bad for company's benefits. (2) The board of supervisors established internal audit system, adhered to strengthening the financial auditing supervisory work on the participating companies, controlling companies and the headquarter of the company. After the audit and inspection, no violations were found. In addition,Lixin Yangchenc Accounting Firm conducted audit on the 2008 financial report of the Company . The audit report accurately reflected financial positions and operating results of the company, the audit report was fair, objective, truthful and reliable. (3) The company did not raise funds from the stock market in the last three years. (4)Acquisition and sale of assets The company invested 30% shares of Ganzhou Kangda Expressway Co., Ltd., and invested 30% shares of Ganzhou Gankang Expressway Co., Ltd. The board of supervisors believed that: The above sold assets had been independently accessed by intermediary agencies, and had been approved by relevant authorities, the new projects invested had good development prospects, and the transaction price was fair and reasonable. No internal transactions were found in the above transaction, found no damage on shareholders’ equity and assets loss of the company. (5) Related transactions In ther report period, The importance connected transactions of the Company during the report 52 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot period include: Guangfo Expressway Co., Ltd. and Guangdong Provincial Fokai Expressway Co., Ltd. as the holding subsidiaries of the Company respectively authorized Guangdong Provincial Expressway Co., Ltd. to construct and manage the expansion project of Guangfo expressway from Yayao section to Xiebian section (called “Guangfo Expansion Project” for short) as well as the reconstruction and expansion project of Fokai expressway from Xiebian section to Sanbao section (called “Fokai Expansion Project”); Guangfo Expressway Co., Ltd. and Fokai Expressway Co., Ltd. respectively paid the corresponding management expenses to the provincial freeway company; the provincial freeway company organized the implementation of the entire process of construction and management of these two expansion projects, undertook the construction and management responsibilities and executed the managements of the project tendering, design, purchase and contracting and construction. The Board of Supervisors holds that the above two authorized managements are intended for authorizing the project construction and management unit which has the corporate capacity to execute the project management according to the relevant provisions of [2004] No. 14 Measures for Administration of Expressway Construction Market issued by the Ministry of Transport for the purpose of improving the project quality and controlling the project cost by making full use of rich experience and outstanding professional forces of Guangdong Provincial Expressway Co., Ltd. in the construction and management of expressway projects so as to ensure the better progress in construction of these projects as well as the interests of investors and project benefits. The authorization matters involved in these two expansion projects do not prejudice any interests of the Company and its shareholders. 53 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot IX Important events 1.The significant litigation and arbitration events in the reporting period. There are litigation in the reporting period: （1）On June 30, 2008, China International Economic and Trade Arbitration Commission Shenzhen Branch made final award on the lawsuit of the dispute in the contract and additional agreement of the China-foreign constructed and operated Fozhan Expressway Dianbai (Magang) to Zhanjian (Suixi) that at the September 25, 2001: (1) The arbitral award includes ruling Southeast Asia Maofa Co., Ltd. to pay the default fine and part of expenses for handling the arbitration case and allocated expenses of each party involved in this arbitration case to the Company. In April 2005, Guangzhou Municipal Intermediate People's Court made a judgment concerning entirely auctioning Maozhan Company’s stocks held by Southeast Asia Maofa Co., Ltd. and made an announcement of auction. Guangzhou Municipal Intermediate People's Court submitted this enforcement case to Guangdong Higher People's Court for jurisdiction transfer in July 2005 according to the notice of Guangdong Higher People's Court regarding liquidation of outstanding cases beyond the legal time limit of enforcement. On September 2, 2008, Yangjiang Municipal Intermediate People's Court made the following ruling: (i) canceling the seizure of 35% of Maozhan Company’s stocks and incomes held by Southeast Asia Maofa Co., Ltd. as the party subject to enforcement; (ii) freezing the debts of RMB5,334,500 that are due to Maozhan Company by Southeast Asia Maofa Co., Ltd. as the party subject to enforcement, and seizing RMB5,334,500 that is due to Southeast Asia Maofa Co., Ltd. as the party subject to enforcement by Maozhan company for repayment of debts, and serving a notice of Assisting in Enforcement to Maozhan Company. This enforcement case has not finally been closed yet. (2) The technology company as the holding subsidiary of the Company filed a lawsuit with the People’s Court of Yuexiu District of Guangzhou in May 2006, requesting Wang Jianji, as the guarantor of Beijing Green Angel Organic Fertilizer Co., Ltd. for the RMB8 million entrusted loan purpose, to perform its guarantee liabilities, repay RMB8 million and accrued interests and disburse a default fine of RMB 93,716.00. The People’s Court of Yuexiu District of Guangzhou made the (2006) YFMEC Zi No. 1708 Judgment of First Instance that the Defendant Wang Jianji should repay the principal of the RMB8 million entrusted loan and its overdue interests as well as pay a default fine of RMB 93,716.00 to the technology company. The Defendant Wang Jianji lodged an appeal against the Judgment of First Instance. Guangzhou Municipal Intermediate People's Court made the (2007) SZFMEZ Zi No. 1057 Judgment of Second Instance to affirm the original judgment on August 24, 2007. Wang Jianji did not accept the civil award of (2007) Suizhongfamingzhong No.1057 by Guangdong Guangzhou Intermediate People's Court and applied to Guangdong Provincial Higher People's Court for retrial. On November 26, 2007, Guangdong Provincial Higher People's Court made (2007) Yegaofaliming No. 1010 award, This case entered the retrial proceedings. On September 11, 2008, Guangzhou Municipal Intermediate People's Court issued the (2008) SZFSJMZ Zi No. 66 Written Civil Ruling that the (2006) SZFLMZ Zi No. 1146 Written Civil Ruling and the (2006) YFMEC Zi No. 1708 Written Civil Ruling made by the People’s Court of 54 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot Yuexiu District of Guangzhou of Guangdong should be rescinded, the (2007) SZFMEZ Zi No. 1057 Paper of Civil Judgment and the (2006) YFMEC Zi No. 1708 Paper of Civil Judgment made by the People’s Court of Yuexiu District of Guangzhou of Guangdong should be rescinded and this case should be transferred to the People’s Court of Xicheng District of Beijing for processing. Does not get further court notice （3）On September 3, 2007，Baijing Gelin Enzhe Fertilizer Co., Ltd. initiated a lawsuit to Beijing No. 1 Intermediate People's Court to sue the controlling subsidiary of the company Guangdong Expressway Technology Investment Co., Ltd. damaging the interests of the company as the shareholder, and ordered the defendant to compensate economic loss RMB 21,549,783 to the plaintiff. On November 12, 2007, the controlling subsidiary of the company Guangdong Expressway Technology Investment Co., Ltd. initiated a lawsuit to Beijing Higher People's Court, to apply for the cancelation of the (2007) – Zhongmingchuzi No. 11,465 civil award, and transferred this cae to appellant’s address Guangzhou Intermediate People's Court. Beijing Higher People's Court made the (2008) Gaomingzhongzi NO. 853 civil award, and rejected the appeal and maintained the original award. The First Intermediate People's Court of Beijing organized the related parties to exchange their evidences on September 5, 2008, the sessional date is postponed till November 14. During this period, Beijing Green Angel Organic Fertilizer Co., Ltd. lodged a withdrawal of this lawsuit. On November 14, 2008, the First Intermediate People's Court of Beijing made the (2007) YZMC Zi No. 11465 Written Ruling that the Plaintiff should be permitted to withdraw its lawsuit against the Defendant Guangdong Freeway Technology Investment Co., Ltd. and the court acceptance fee of RMB70 should be borne by the Plaintiff. (4) On June 15, 2007 morning, the Nanguiji 035 ship owned by Yang Xiong, Foshan Nanhaiyu Ship Co., Ltd. heated Jiujiang Bridge on 325 National Road owned by the controlling company of the company, and resulted in more than 200 meters of Jiujiang Bridge collapsed. On June 19, 2007, The Ministry of Communications, the State Production Safety Supervision and Administration Commission issued the JiaoAnWeiming File [2007] No. 8 "Notification on the Guangdong"6.15 "Jiujiang Bridge Collision Accident", initially determined the causes of the accident are: the incident ship suddenly met heavy fog on the way from Foshan Gaoming to Sunde, the captain neglected looking out, did not take proper measures and deviated from the main channel, touched the 325 National Road Jiujiang Bridge the non-navigation bridge pier and caused the collapsion of part of the Jiujiang bridge. The accident was an unilateral responsibility of the ship. On July 19, 2007,Fokai Expressway Co., ltd. applied preservation of property to Guangzhou Maritime Court. On August 22, 2007, Fokai Company officially prosecuted to Guangzhou Maritime Court, asking Foshan South Sea Shipping Company Limited and Yang Xiong to undertake the conpensation 25,587,684 yuan for the loss caused by collapsion of Jiujiang Bridge. On August 28, 2007, Guangzhou Maritime Court accepted the case. According to the (2007)-Canton Haifa No. 332 ruling book issued by Guangzhou Maritime Court, the proceeding of the case was suspended. After the court accepted the case, the incident investigation team of Guangdong Provincial Government had not made the final report of Jiujiang Bridge accident. The Court, on November 5, 2007, decided to suspend the proceeding. In September 2008, Jiujiang Bridge accident 55 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot investigation report was officially reported and resumed the proceedings. On December 5, 2008, Guangzhou Marine Court opened a court trial to procceeded the case. Currently, Guangzhou Haizhu prosecutorial office was intend to prosecute the accident captain Shi Guide, therefore, on January 5, 2009, Guangzhou Maritime Court ruled the suspension of the case. (5) Guangdong Freeway Technology Investment Co., Ltd. as the holding subsidiary of the Company had trouble with the transferee due to transfer of the stocks of Tibet Energy Storage Technology Development Co., Ltd. that were held by Guangdong Freeway Technology Investment Co., Ltd. On August 28, 2008, the transferees Li Weiqiang, Yang Yuanming, Lin Zehong and Qin Weijie proceeded against Guangdong Freeway Technology Investment Co., Ltd. with the People’s Court of Yuexiu District of Guangzhou, requesting this court to judge cancelling the Stock Transfer Agreement between the plaintiffs and the defendant, refunding the stock transfer fee of RMB10,150,000 collected by the defendant as well as compensating the economic loss of RMB3,120,000 to the plaintiffs, totaling RMB13,280,000. The People’s Court of Yuexiu District of Guangzhou accepted and filed this case and tried it in court on October 7, 2008. Subsequently, four plaintiffs including Li Weiqiang, Yang Yuanming, Lin Zehong and Qin Weijie made an application for withdrawal of this lawsuit. The People’s Court of Yuexiu District of Guangzhou made the (2008) YFMEC Zi No. 2852-2855 Written Civil Ruling that these plaintiffs should be permitted to withdraw this lawsuit and the court acceptance fee of this case should be collected by half and borne by these plaintiffs. (6)On April 2007, Guangdong Expressway Technology Investment Co., Ltd. initiated a lawsuit to Shenzhen Intermediate People's Court, approving in April 2003 the company invested 30 million yuan to participate in Qinghai Securities Company (now it was changed to Kunlun Securities Co., Ltd., and in October 2006, Xining Intermediate People's Court ruled it to enter the insolvency proceedings), two original shareholders of Qinghai Securities Company (Qinghai Digital Network Investment (Group) Co., Ltd., Shenzhen Sitong Investment and Development Company) hide their debts and losses and made false investor, in April 2003, the other three new shareholders (Qinghai Enterprise Technology Innovation Investment Management Co., Ltd., Xining Special Steel Group Co., Ltd., Fulin Group (Shenzhen) Limited shares Company) escaped investment fund, and the accounting institution of Qinghai Securities Company Co., Ltd. (Fulian Joint Accounting Firm Co., Ltd.) made major faults in capital verification. According to the above reasons, Guangdong Expressway Technology Investment Co., Ltd. made requirements on the 30 million investment loss of Kunlun Securities Co., Ltd. that: Qinghai Digital Network Investment (Group) Co., Ltd., Shenzhen Sitong Investment Development Co., Ltd., Qinghai Enterprise Technology Innovation Investment Management Co., Ltd., Xining Special Steel Group Co., Ltd., Fulin Group (Shenzhen) Co., Ltd. had joint liability on the 30 million yuan investment loss; Wulian Joint Accounting Firm Co., Ltd. had joint liability on the investment loss if Qinghai Digital Network Investment (Group) Co., Ltd. and Shenzhen Sitong Investment and Development Company Limited can not pay the investment loss. Shenzhen Intermediate People's Court has accepted the case, the defendant has put forward relevant jurisdiction objections, In October 2007, Shenzhen Intermediate Court decided to reject the objection of jurisdiction, the defendants refused to accept the ruling and they had appealed to Guangdong Provincial Higher People's Court. On June 7, 2008, Guangdong Provincial Higher People's Court issued the (2008) Yue Supreme People's Court Yue Civil No. 159 civil ruling book, the appeal was rejected and upheld the 56 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot original award. The defendants refused to accept the civil award, and on November 11, 2008, application was offered to the Supreme People's Court for retrial, and the Court had received it. On December 30, 2008, Guangdong Expressway Investment Co., Ltd. and Shenzhen Sitong Investment Co., Ltd. received a reconciliation agreement. On the same day, Guangdong Guangdong Expressway Technology Investment Co., Ltd. applied to Guangdong Shenzhen Intermediate People's Court to withdraw the procecution for the reason that Guangdong Expressway Technology Investment Co., Ltd. and the party concerned had reached. On January 9, 2009, Guangdong Expressway Technology Investment Co., Ltd. received the civil ruling file (2007) Shen Civil No.135 ruled by Shenzhen Intermediate People’s Court, approving Guangdong Expressway Technology Investment Co., Ltd. to withdraw the procecution. 2. Major Bankruptcy Reorganization of the company and the related events During the reporting period, the company had no major bankruptcy-related events. 3. The company hold shares of other listed companies, shares of financial firms. The Changes of Loss and proportion owner’s Name of Initial Book gain in Accounting to the equity in Origin of subjects investment Number held value at the calculation equity of the equity held amount period end reporting subjects the reporting period company period Sharehol Huaxia Long-term der Securities 5,400,000.00 5,400,000 0.27% 0.00 0.00 0.00 equity investme Co., Ltd. investment nt Huazheng Dividen Long-term Assets d 1,620,000.00 1,620,000 0.54% 226,800.00 0.00 0.00 equity Manageme Investm investment nt Company ent Kunlun Long-term Purchas Securities 30,000,000.00 30,000,000 5.74% 0.00 0.00 0.00 equity ed Co., Ltd. investment Total 37,020,000.00 37,020,000 - 226,800.00 0.00 0.00 - - 4.Acquisition and sale of assets and corporate merger during the reporting period and their impacts. On June 12, 2008, the Proposal Concerning Detailed Scheme of Non-public Offering of Corporate Stocks to Specific Objects and Preliminary Program Concerning Reorganization of Material Assets Purchased by Offering of Stocks of Guangdong Provincial Expressway Development Co. Ltd. to Guangdong Provincial Expressway Co., Ltd. were deliberated and passed at the eighth meeting of the fifth Board of Directors held by the Company, and Guangdong Provincial Expressway Development Co. Ltd. intended to purchase 100% stocks (“target assets”) of 57 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot Guangzhou Shenfo Expressway Co., Ltd. held by it by non-public offering of A stocks to Guangdong Provincial Expressway Co., Ltd. as the specific object. Since the Board of Directors made the above resolutions, the Company has been actively promoting the process of the above reorganization of material assets, and the Provincial State-owned Assets Supervision and Administration Commission gave an official written reply to the capital operation program, and the provincial government and Department of Land and Resources of Guangdong gave a support to reduction and exemption of the land certificate-making fees and authorized operation of western section of Shenzhen to Shantou Highway. However, as the State Ministry of Transport promulgated the Measures for the Transfer of Rights and Interests in Toll Roads (“the Measures”) and Notice Concerning Issues of Strengthening the Management of Transfer of Rights and Interests in Toll Roads (“the Notice”) respectively on August 20, 2008 and September 18, 2008 with the view of establishing some restricted regulations with regard to the related method of transfer of rights and interests in toll roads and consideration payment method. The Article 19 of the Measures stipulates that “To transfer the right to collect tolls for a road for which the government repays the loan or for a commercial road with fiscal investment, the transferee shall be selected by public bidding on a fair, impartial and open basis.” In addition, the Article 5 of the Notice stipulates that “In case of the transfer of rights and interest in a road for which the government repays the loan or in a commercial road with fiscal investment or utilization of rights and interests in a commercial road with state-owned capital investment, the transferee shall be specifically requested to pay the transfer fee in cash other than in other non-cash ways such as stocks (equity), bonds, physical assets or intangible assets. The period of payment of the transfer fee by the transferee shall not be longer than 6 months after this contract becomes effective, and the transferee shall not pledge the right to collect tolls for a toll road to obtain the bank loan by which the transfer fee is paid.” According to the preceding stipulations, the right to charge on these target assets shall be transferred by public bidding and the transfer fee shall be paid in cash to render the Company incapable of purchasing these target assets by non-public offering of stocks. Therefore, a resolution on the termination of implementation of the Proposal Concerning Detailed Scheme of Non-public Offering of Corporate Stocks to Specific Objects which was deliberated and passed at the eighth meeting of the fifth Board of Directors held by the Company on June 12, 2008 was deliberated and passed at the meeting of the Board of Directors of the Company. 5.Major related transactions occurred during the reporting period （1）Guangfo Expressway Co., Ltd. ("Guangfo Company") and Guangdong Fokai Expressway Co., Ltd. ("Fokai Company"), two controlled subsidiaries of the Company, respectively entrusted Guangdong Expressway Co., Ltd. ("Guangdong Expressway Company") with construction management of the expansion project of Yayao-Xiebian Section of Guangfo Expressway ("Guangfo Expansion Project") and the expansion project of Xiebian-Sanbao Section of Fokai Expressway ("Fokai Expansion Project"). Guangfo Company and Fokai Company respectively paid corresponding management fee to Guangdong Expressway Company. Guangdong Expressway Company organized the implementation of construction management of the whole 58 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot process of two expansion projects, assumed responsibility for construction management and conducted tender invitation management, design management, purchase and contract awarding management and construction management of the projects. Guangdong Expressway Company is a wholly-owned subsidiary of Guangdong Communication Group Co., Ltd., the controlling shareholder of the Company. According to Stock Listing Rules of Shenzhen Stock Exchange, Guangdong Expressway Company is a related party of the Company. The transactions respectively carried out by Guangfo Company and Fokai Company with Guangdong Expressway Company constitute two related transactions of the Company. II. Introduction of related parties Guangdong Expressway Company is a wholly-owned subsidiary of Guangdong Communication Group Co., Ltd., the holding parent company of the Company. It holds 1.54% equity of the Company and 25% equity of Fokai Company at the same time. Enterprise type of Guangdong Expressway Company: Limited liability company; Place of registration: 83 Baiyun Road, Guangzhou; Legal representative: Luo Yingsheng. Main operation: Investment in expressways and their supporting facilities, project operation and management, organization management of fueling and parts and components supply supporting expressways. Registered capital: RMB 4.8 billion; III. Basic information about the object of related transaction The objects of this transaction are Guangfo Expansion Project and Fokai Expansion Project. 1. The matter concerning Guangfo Expansion Project was examined and adopted in succession at a provisional meeting of the fourth board of directors held on November 30, 2006 and the first provisional shareholders' general meeting in 2006 held on December 20, 2006. Guangfo Company is the owner of Guangfo Expansion Project. The Company holds 75% equity of Guangfo Company. It will increase the capital of Guangfo Company by RMB 93.36936 million for the construction of Guangfo Expansion Project. Pearl River Capital Investment Co., Ltd., the other shareholder of Guangfo Company holds 25% equity of Guangfo Company. It will also increase the capital of Guangfo Company according to corresponding shareholding ratio for the construction of Guangfo Expansion Project. 2. The matter concerning Fokai Expansion Project was examined and adopted in succession at the 4th meeting of the fifth board of directors of the Company held on September 11, 2007 and the first provisional shareholders' general meeting in 2007 held on September 27, 2007. For the details of this project, investors may look up the Announcement of Related Transaction Concerning Capital Increase of Fokai Expressway Co., Ltd. for Expansion of Xiebian-Sanbao Section of Fokai Expressway published by the Company on China Securities Daily, Securities Times, Shanghai Securities Daily, Hong Kong Commercial Daily and www.cninfo.com.cn on September 12, 2007. 3. Main content of related transaction contract and pricing policy 1. Guangfo Company and Guangdong Expressway Company signed Agreement for Entrustment of Construction Management of Expansion Project of Yayao-Xiebian Section of Guangfo Expressway and plan to sign Supplemental Agreement for Entrustment of Construction Management in the near future. The main content of the Agreement and Supplemental Agreement is as follows: (1) The work content of entrusted construction management includes: 59 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot I. Preparation stage: Guangdong Expressway Company shall handle relevant procedure for approval of the expansion project for Guangfo Company; II. Implementation stage: Guangdong Expressway Company shall be fully responsible for conducting construction management of the expansion project, organizing project delivery and acceptance inspection and controlling and managing the quality, progress, construction cost, safety, contract, scientific research and information of the expansion project according to the entrustment of Guangfo Company; III. Account settlement and defect repair stage: Guangdong Expressway Company shall be fully responsible for settling accounts and defect repair management of the expansion project and organizing inspection and final acceptance by relevant units according to the entrustment of Guangfo Company; IV. Other matters directly related to the entrusted construction management of the expansion project to be handled according to the entrustment of Guangfo Company. (2) Construction management fee, entrusted management fee and bonus: I. Construction management fee. Construction management fee shall be set according to the standard for level-2 construction unit for Guangdong Expressway Company and checked and approved at the on-site work meeting of the management office held by Guangdong Expressway Company each year. The construction management fee shall be listed in the final accounts of the project; II. Bonus. Bonus shall be calculated based on appraisal of three control items of the management office in each construction year and after completion of construction according to relevant regulations of Provincial Communication Department and Provincial Communication Group and the Regulations of Guangdong Expressway Co., Ltd. on Performance Appraisal of Construction Projects in force; III. Entrusted management fee. In addition to the said expenses, Guangfo Company shall pay RMB Five Hundred Thousand Only to Guangdong Expressway Company as the management fee for completing the entrusted matters. This fee shall be paid on yearly basis after Guangdong Expressway Company completes the entrusted tasks for the year according to contract requirements. The concrete amount of payment: RMB Two Hundred Thousand for 2006; RMB Two Hundred Thousand for 2007; RMB One Hundred Thousand for 2008. (3) Conditions of effectiveness: The agreement shall take effect from the day when relevant resolutions of the shareholders' general meeting and the board of directors of the Company are adopted. 2. Fokai Company and Guangdong Expressway Company signed Agreement for Entrustment of Construction Management of Expansion Project of Xiebian-Sanbao Section of Fokai Expressway on May 20, 2005 and plan to sign Supplemental Agreement for Entrustment of Construction Management in the near future. The main content of the Agreement and Supplemental Agreement is as follows: (1) Work content of entrusted construction management: Refer to IV. 1. (l) of this announcement. The content is basically the same except that "Guangfo Company" shall be turned into "Fokai Company". (2) Construction management fee, entrusted management fee and bonus: For construction management fee and bonus, refer to the corresponding content of IV. l. (2) of this announcement. In addition, the standard of entrusted management is as follows: Fokai Company shall pay RMB 60 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot One Million Only to Guangdong Expressway Company as the management fee for completing the entrusted matters. This fee shall be paid on yearly basis after Guangdong Expressway Company completes the entrusted tasks for the year according to contract requirements. Concrete amount of payment: Payment shall be made in the proportion of 25% respectively in 2007, 2008, 2009 and 2010. 3. Pricing policy: The said standard of construction management fee, entrusted management fee and bonus is set according to engineering construction management experience and through consultation between both parties based on the principle of fairness. 4．Purpose of related transaction The purpose of this related transaction is to make full use of the rich experience and excellent professional capacity of Guangdong Expressway Company in respect of construction management of expressway projects, enhance project quality, control project cost, ensure smooth construction of this project and guarantee the interests of investors and good return of the project. （2）Guangdong Fokai Expressway Co., Ltd., a controlled subsidiary of the Company (of which the Company holds 75% equity), carried out public bidding for the construction of K46+600 ～ k79+864 major maintenance project of Fokai Expressway through Guangzhou Construction Project Trading Center(http://219.136.222.219/t05wz/index.jsp ） . Bid evaluation was conducted on August 20, 2008. According to the result of bid evaluation, Guangdong Fokai Expressway Co., Ltd. signed civilwork contract respectively with Guangdong Changda Highway Engineering Co., Ltd. and Guangdong Guanyue Road & Bridge Co., Ltd. respectively on September 22, 2008 and September 19, 2008. The contract amount is respectively RMB 129,629,050 and RMB 128,364,180. As Guangdong Changda Highway Engineering Co., Ltd., Guangdong Guanyue Road & Bridge Co., Ltd. and the Company are all controlled subsidiaries of Guangdong Communication Group Co., Ltd., the controlling shareholder of the Company, these two contracts involve related transaction. Considering that the said related transaction was caused by tender invitation and the project was publicly disclosed through Guangzhou Construction Project Trading Center while the process of bid evaluation was open, fair and impartial and complied with relevant regulations, no interest transportation and harm of interests of other shareholders existed. After application to and approval by Shenzhen Stock Exchange, the Company is exempted from performing relevant obligations according to the provisions of Chapter 10 of Stock Listing Rules of Shenzhen Stock Exchange, i.e., Related Transaction. I. Basic information about the transaction party (1)Guangdong Changda Highway Engineering Co., Ltd. Guangdong Changda Highway Engineering Co., Ltd., a wholly-owned subsidiary of Guangdong Communication Group, is mainly engaged in construction of highways, bridges and tunnels, BT and BOT investment and construction, general contracting of design and construction and operation management of highway projects, expressway maintenance, reinforcement and maintenance of old bridges and construction of international projects. （2）Guangdong Guanyue Road & Bridge Co., Ltd. Guangdong Guanyue Road & Bridge Co., Ltd., a controlled subsidiary of Guangdong 61 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot Communication Group Co., Ltd., is mainly engaged in general contracting of construction of large-scale highway construction projects, specialized construction of roadbeds, road surface, bridges and tunnel works, repair and maintenance of expressways, comprehensive technology consultation about tender invitation and bidding, management of process research, lease and sales of road building equipment and materials. II. Basic information about the transaction object and main content of agreement 1. The transaction object is the major maintenance project of No.1 and No.2 contract section of K46+600～k79+864 of Fokai Expressway. Main works include remedial treatment of road surface and upgrading reconstruction of traffic safety facilities along the highway. 2. The total contract price calculated according to the estimated quantity and unit price or total amount listed in the bill of quantities is RMB 129,629,050 and RMB 128,364,180 respectively. Fokai Company will pay the contract price according to project progress. 3. The contractual construction period is 101 days, calculated from the day after the day of highway closure. III. Influence on the Company's financial position and operating results in current period and in the future This major maintenance project is in the annual plan of Fokai Company. As part of sections need to be closed in the construction period (the planned construction time is 101 days in total from September 18, 2008 to December 28, 2008), the vehicle traffic volume and toll of Fokai Expressway will be somewhat affected. However, the influence on the overall financial position and operating results of the Company will be small. (3) Other daily related transactions ,See Financial statement 7, 6. Important contracts and implementing 1. The Company did not hold in trust or contract for or lease the assets of other companies nor did other companies hold in trust, contract for or lease the assets of the Company in the report period. 2. The Company did not provide important external guarantee in the report period. 3. The Company did not entrust others with money management in the report period. 4. The Company's material contracts in the report period 7. Commitments. The Company's plan for share holding structure reform was voted through at the shareholders' meeting concerning share holding structure reform on December 21, 2005. On February 16, 2006, the non-tradable shares obtained the listing flow right. In addition to honoring specified statutory commitment, shareholders holding non-negotiable shares made the following commitment in this plan: (1) The non-negoti1ble sh1res held by the Comp1ny's sh1reholders holding non-negoti1ble sh1res sh1ll not be listed, tr1ded or 1ssigned within twelve months from the d1te of obt1ining the right of listing 1nd negoti1tion. Meanwhile, Guangdong Communication Group Co., Ltd., the controlling shareholder, and its related companies including Guangdong Expressway Co., Ltd., Guangdong Traffic Development Company, Guangdong Communication Development Company and Guangdong Guanghua Expressway Company further promised that the non-negotiable shares held by them would not be listed and traded within twenty four months after the expiration of the said period of twelve months. (2) After the implementation of share holding structure reform, Guangdong Communication 62 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot Group Co., Ltd. promised to propose the maintenance of the Company's cash dividend policy in force for the period from 2005 to 2007 and cast affirmative vote at the shareholders' general meeting. Since the listing of the Company, i.e., in the period from 1996 to 2004, the arithmetic average of the proportion of the amount of cash dividends to the net profit for current year was 61.26%. The proportion of cash dividend distribution of the Company in the next three years will not be lower than this proportion. (3) In order to maintain appropriate holding level and enhance its position of controlling shareholder after share holding structure reform, Guangdong Communication Group Co., Ltd. promised that it or its wholly-owned subsidiaries would invest RMB 400 million in purchasing negotiable Guangdong Expressway A shares in secondary market at appropriate time within twelve months after adoption of the plan for share holding structure reform at relevant shareholders' meeting of the Company under the premise of obtaining CSRC's exemption of general tender offer. Within six months after the completion of share purchase plan each time, Guangdong Communication Group Co., Ltd. and its wholly-owned subsidiaries will not sell the shares purchased and will perform relevant information disclosure obligation. In case of sales in the said period, all income shall belong to all shareholders of the Company. Status of fulfillment: (1) The non-negotiable shares held by the Company's shareholders holding non-negotiable shares will be listed and traded after the expiry of the commitment term. This commitment is under fulfillment. (2) Guangdong Communication Group Co., Ltd. proposed cash dividend distribution and cast affirmative vote at 2007 annual shareholders' general meeting. The Company paid RMB 1.6 (including tax) for every 10 shares with total share capital, i.e., 1,257,117,748 shares, The dividend was totalled to RMB201,138,839.68 and accounted for 61.85% of the total net profit of the year..as the base in 2005 and paid RMB 1.7 in cash to all shareholders for every 10 shares. The Company paid RMB 1.6 (including tax) for every 10 shares in 2005. Cash dividends of RMB 201,138,839.68 were distributed in total, as the base in 2006 and paid RMB 1.7 in cash to all shareholders for every 10 shares. The dividend was totalled to RMB213,710,017.16 and accounted for 64.40% of the total net profit of the year. For 2007 and the first quarter of 2008, the Company paid RMB 2.4 in cash to all shareholders for every 10 shares. The dividend was totalled to RMB301,708,259.52 , The amount of cash dividends accounts excessed the parent company's net profit 61.26%, This commitement has already fulfilled. (3) Guangdong Communication Group Co.,Ltd as a controlling shareholder made a promise of performance that it will pick an opportune moment to invest RMB0.4 billion in increasing its A stocks of Guangdong Provincial Expressway Development Co. Ltd. in the secondary market. Up to February 16, 2007, Guangdong Provincial Transport Group Co., Ltd. has increased by 98,932,191 A stocks of Guangdong Provincial Expressway Development Co. Ltd. by investment of RMB0.4 billion, accounting for 7.87% of total stocks of the Company. Therefore, this promise has been performed. （II）As examined and adopted at the provisional meeting of the fifth board of directors held on October 29, 2008, the Company terminated the implementation of the Proposal Concerning Concrete Plan for the Company's Non-public Issue of Shares to 63 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot Specific Objects examined and adopted at the 8th meeting of the fifth board of directors held on June 12, 2008 and promised no plans for significant reorganization matters within three months from the day when the resolution of this board meeting was announced. Details of performance: the Board of Directors of the Company has not made plans for any significant reorganization within three months from October 29, 2008. (3) Guangdong Communication Group Co.,Ltd. as a controlling shareholder of the Company and Xinyue Company Limited as its person acting in concert increased part of A stocks and B stocks of the Company by Stock Trading System of Shenzhen Stock Exchange on December 11, 2008, and promised that they would not reduce their stocks of the Company during the execution of the plan of stock increase and within the legal time limit. Details of performance: up to the publishing date of this report, Guangdong Provincial Transport Group Co., Ltd. and Xinyue Company Limited as its person acting in concert have not reduced their stocks of the Company. Therefore, this promise is still being performed. 8. Appointment of certified public accountants In the report period ， the Company continued to engage Yangcheng Certified Public Accountants as domestic and overseas audit bodies for the Company. According to File No.30 Zhengjian Kuaiji Zi [2007], the Notice on the Audit-related Problems of Issuance of Domestic Foreign Shares, the foreign audit for the issuance of domestic listed foreign shares company would not be conducted, therefore, in 2008, the Company would not employ Ernst & Young . The particulars about the remuneration of certified public accountants: Year 2008 Number of continuous Certified public Financial audit Other expenses years of provision of accountants expenses audit services to the Company Guangzhou RMB0.152 Yangcheng Certified RMB1.19 million 17 years million public Accountants The Company did not bear the traveling expenses of certified public accountants. IX. The Company, its board of directors and its directors were not investigated by CSRC, administratively punished or publicly criticized by CSRC or publicly condemned by stock exchange. X. Other Important matters The registration form of acceptance of investigation, communication and interview in the report period for future reference Date Place Mode Visitor Content of 64 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot discussion and materials provided 1.Communication of Researchers of Lianhe the content of the Securities Co., Ltd, Researchers Companys June 13,2008 The Company Telephone of Orient securities Co., significant asset Ltd.and Researchers of Pinan reorganization Securities Co., Ltd. preplan and relevant opinions Joined the expressway Researchers of Boshi Funds, 1.Communication of meeting of Researchers of Shangtou Morgan the content of the investment Foundation Management Co., 2/F,Shenzhen Companys strategy Ltd.., Researchers from Guangfa June 17,2008 Bolin Ruofu significant asset meeting held by Funds, Researchers of Baoying Hotal reorganization Pingan Funds and Researchers of CCB preplan and relevant Securities in Principal Asset Management Co., opinions 2008. Ltd. 1.Communication of the content of the CSFB S/A QINHAN CHINA Companys June 18,2008 The Company Telephone MASTER FUND (CAYMAN) significant asset LTD. reorganization preplan and relevant opinions Learning about the The Company basic operating and The status of the expressways in Onsite Researchers of Industrial Company and the July 8,2008 which the investigation Securities conditions of main Company expressways invested operated by the Company 1. Learning about the basic operating The Company status of the Company; Onsite Researchers of Industrial 2. Communication July 8,2008 investigation Securities of the content of the The road Companys section for significant asset the company reorganization preplan 65 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot Learning about the August Researcher OF Value basic operating The Company Telephone 20,2008 partuners limited status of the Company 1 Learning about the basic operating The Company status of the Company； 2.To find out the August Onsite Researchers of Industrial road condition of 26,2008 investigation Securities The road the target section for projects in the the company Company’s significant asset reorganization. Continuingly learning about September Onsite Researchers of Industrial The Company the basic 3,2008 investigation Securities operating status of the Company Continuingly learning about September Onsite Researchers from Guangfa The Company the basic 3,2008 investigation Securities operating status of the Company Learning about the September Onsite Researchers from Guangzhou basic operating The Company 5,2008 investigation Securities status of the Company Learning about the Researchers from Guotai Septebmer Onsite basic operating The Company Junan securities, Researcher 8,2008 investigation status of the from Harvest Fund Company 1. Learning about the basic operating status of the Company; Research Director from 2. To find out the October Onsite The Company Yongjin Assets Management road condition of 7,2008 investigation Company the target projects in the Company’s significant asset reorganization 66 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot 1. Learning about the basic operating status of the Company； 2. To find out the October Onsite The Company Researcher from Huaxia Funds road condition of 21,2008 investigation the target projects in the Company’s significant asset reorganization 1. Learning about the basic operating status of the Company； Researcher from Yinmin Funds 2 To find out the November Onsite The Company and Researcher from Guangfa road condition of 12, 2008 investigation Securities the target projects in the Company’s significant asset reorganization 1 Learning about the basic operating status of the Company, Joined the Introduced the expressway basic operating meeting of Researcher and Funds Manager information of the November investment form Industrial Securities,Huatai company; Shanghai 20, 2008 strategy Securities,Dacheng Funds Boshi 2. Communicated meeting held by Funds . with researchers Industrial on the industry Securities. and the development of the Company and answer some of problems. 67 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot X. Financial Report Auditors’ Report Report No: (2008)YCZD No.:15367 SZXBB No.: 020200902002380 To all shareholders of Guangdong Provincial Expressway Development Co., Ltd.: We audited accompanying financial statements of Guangdong Provincial Expressway Development Co., Ltd. (hereinafter referred to as "the Company"), including balance sheet on December 31, 2008, profit statement, cash flow statement for the year 2008 and statement of change in shareholders' equity and the notes to financial statements. I. The responsibility of the management for financial statements Preparation of financial statements in accordance with the Accounting Standards for Business Enterprises and Accounting Regulations for Business Enterprises is the responsibility of the management of the Company. Such responsibility includes: (1) design, implementation and maintenance of internal control related to the preparation of financial statements so that financial statements are free from material misstatement caused by fraudulent practices or errors; (2) selection and application of proper accounting policies; (3) making reasonable accounting estimate. II. Responsibility of certified public accountants We are responsible for expressing opinions on financial statements based on our audit. We conducted audit in accordance with the audit criteria for Chinese certified public accountants. The audit criteria for Chinese certified public accountants require us to abide by professional ethics, plan and conduct audit to obtain reasonable assurance as to whether financial statements are free from material misstatement. Audit involves carrying out audit procedure to obtain the audit evidences about the amounts and disclosure of financial statements. The selected audit procedure relies on the judgment of certified public accountants, including the appraisal of risk of material misstatement of financial statements caused by fraudulent practices or errors. While appraising risks, we considered the internal control related to the preparation of financial statements to design proper audit procedure but the purpose is not to express an opinion on the effectiveness of internal control. The audit also includes the appraisal of suitability of accounting policies selected by the management, the reasonableness of accounting estimate and the overall presentation of financial statements. We believe that the audit evidences obtained by us are full and appropriate and provide a basis for expressing audit opinion. III. Audit opinion 68 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot In our opinion, the financial statements of the Company have been prepared in accordance with the provisions of Accounting Standards for Business Enterprises and Accounting Regulations for Business Enterprises and give a fair view, in all material aspects, of the financial position of the Company on December 31,2008 and its operating results and cash flow for the year 2008. Lixin Yangcheng Certified public Accountants Certified Public Accountant：Liu Jiesheng Certified Public Accountant：Xiong Wei Guangdong, China February 20,2009 69 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot 1. Balance Sheet Unit：RMB Year-end balance Year-beginning balance Item Parent Company. Parent Company. Consolidated Consolidated Current asset： Monetary fund 350,765,725.76 41,195,556.89 190,665,302.76 34,847,364.21 Settlement provision Outgoing call loan Trading financial assets Bill receivable Account receivable 12,654,511.88 22,736,135.67 Prepayments 85,087,576.90 7,049,638.50 Insurance receivable Reinsurance receivable Provisions of Reinsurance contracts receivable Interest receivable Dividend receivable 14,970,025.14 14,970,025.14 84,365,662.22 Other account 28,323,738.28 31,749,471.14 22,610,107.93 33,740,902.88 receivable Repurchasing of financial assets Inventories 405,711.52 140,706.53 Non-current asset due in 1 year Other current asset Total of current assets 492,207,289.48 87,915,053.17 243,201,891.39 152,953,929.31 Non-current assets： Loans and payment on other’s behalf disbursed Disposable financial asset Expired investment in possess Long-term receivable Long term share equity 2,196,261,073.68 3,257,393,823.31 1,852,483,899.54 2,913,289,203.35 investment Property investment 70 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot Fixed assets 3,443,865,259.05 11,186,504.90 3,101,028,123.64 11,467,397.78 Construction in 1,083,046,214.97 420,770,409.92 progress Engineering material Fixed asset disposal Production physical assets Gas & petrol Intangible assets 71,220,847.00 180,363,646.01 R & D petrol Goodwill Long-germ expenses to 1,968,947.82 3,510,132.90 be amortized Differed income tax 10,967,868.43 1,002,353.86 asset Other non-current asset Total of non-current 6,807,330,210.95 3,268,580,328.21 5,559,158,565.87 2,924,756,601.13 assets Total of assets 7,299,537,500.43 3,356,495,381.38 5,802,360,457.26 3,077,710,530.44 Current liabilities Short-term loans 300,000,000.00 100,000,000.00 Loan from Central Bank Deposit received and hold for others Call loan received Trade off financial liabilities Bill payable Account payable 107,100,915.00 24,964,489.25 Prepayment 6,125,701.56 6,548,310.30 Selling of repurchased financial assets Fees and commissions receivable Employees’ wage payable 11,827,195.03 7,000,193.40 11,352,368.41 6,713,832.75 Tax payable 3,911,924.42 196,664.32 38,809,210.62 50,586.66 Interest Payable 5,537,848.30 2,062,015.50 Dividend Payable 12,316,103.37 12,316,103.37 56,046,579.18 17,924,691.75 Other account payable 263,417,611.91 139,138,865.17 238,542,275.06 34,163,877.17 Reinsurance fee payable Insurance contract 71 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot provision Entrusted trading of securities Entrusted selling of securities Non-current liability 290,000,000.00 470,000,000.00 due in 1 year Other current liability Total of current 1,000,237,299.59 158,651,826.26 948,325,248.32 58,852,988.33 liability Non-current liabilities： Long-term loan 2,348,324,803.54 988,324,803.54 Bond payable Long-term payable 2,022,210.11 2,022,210.11 2,022,210.11 2,022,210.11 Special payable 100,000.00 100,000.00 Expected liabilities Differed income tax 101,054,676.23 85,043,508.88 liability Other non-current liabilities Total of non-current 2,451,501,689.88 2,022,210.11 1,075,490,522.53 2,022,210.11 liabilities Total of liability 3,451,738,989.47 160,674,036.37 2,023,815,770.85 60,875,198.44 Owners’ equity Share capital 1,257,117,748.00 1,257,117,748.00 1,257,117,748.00 1,257,117,748.00 Capital reserves 1,534,906,856.32 1,534,906,856.32 1,534,906,856.32 1,534,906,856.32 Less：Shares in stock Surplus reserves 91,921,501.73 91,921,501.73 43,852,074.48 43,852,074.48 Common risk provision Attributable profit 537,158,754.16 311,875,238.96 488,675,530.65 180,958,653.20 Different of foreign currency translation Total of owner’s equity belong to the parent 3,421,104,860.21 3,195,821,345.01 3,324,552,209.45 3,016,835,332.00 company Minority shareholders’ equity 426,693,650.75 453,992,476.96 Total shareholders’ equity 3,847,798,510.96 3,195,821,345.01 3,778,544,686.41 3,016,835,332.00 Total liabilities and 7,299,537,500.43 3,356,495,381.38 5,802,360,457.26 3,077,710,530.44 shareholders’ equity 72 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot 2. Profit statement Unit ：RMB Current term Same period last year Item Consolidated Parent Company Consolidated Parent Company I.Total business income 937,278,307.42 507,486.40 1,113,184,855.26 286,914.80 Inc l：Business income 937,278,307.42 507,486.40 1,113,184,855.26 286,914.80 Interest income Insurance fee earned Fee and commission received II.Total business cost 632,443,384.94 50,451,462.54 580,195,295.13 49,732,141.24 Incl：Business cost 382,905,037.25 337,639,165.35 Interest expense Fee and commission paid Insurance discharge payment Net claim amount paid Net insurance policy reserves provided Insurance policy dividend paid Reinsurance expenses Business tax and surcharge 30,662,755.40 25,374.32 36,482,314.93 14,345.74 Sales expense Administrative expense 100,939,447.79 49,964,714.10 96,101,830.07 50,089,812.69 Financial expenses 118,254,313.15 946,766.79 101,820,214.90 -466,303.09 Asset impairment loss -318,168.65 -485,392.67 8,151,769.88 94,285.90 Add：Gains from change of “-”for loss） fair value（ Investment gain（“-”for loss） 254,733,099.28 530,781,048.67 260,239,784.93 530,530,579.23 Incl：Investment gains 254,733,099.28 255,060,545.10 260,239,784.93 262,170,737.15 from affiliates Gains from currency exchange（“-”for loss） III. Operational profit（ “-”for 559,568,021.76 480,837,072.53 793,229,345.06 481,085,352.79 loss） Add：Non-Business income 4,248,810.80 2,000.00 3,385,147.34 564,815.64 Less：Non-Business 35,908,342.43 144,800.00 55,261,016.95 246,203.77 expenses Incl：loss from disposal of 31,781,537.83 51,411,075.83 246,203.77 non-current assets IV. Gross profit（“-”for loss） 527,908,490.13 480,694,272.53 741,353,475.45 481,403,964.66 73 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot Less：Income tax expenses 65,039,571.54 150,856,791.72 V.Net profit（ “-”for net loss） 462,868,918.59 480,694,272.53 590,496,683.73 481,403,964.66 Net profit attributable to the 398,260,910.28 480,694,272.53 493,661,982.44 481,403,964.66 owners of parent company Minor shareholders’ equity 64,608,008.31 96,834,701.29 VI. Earnings per share： （i）Basic earnings per share 0.32 0.38 0.39 0.38 （ii）Diluted earnings per 0.32 0.38 0.39 0.38 share 74 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot 3.Consolidated Cash Flow statement Unit：RMB Current term Same period last year Item Consolidated Parent Company Consolidated Parent Company I.Net cash flow form business operation Cash received from sales of products and 946,922,111.78 460,286.40 1,109,948,010.58 286,214.80 providing of services Net increase of customer deposits and capital kept for brother company Net increase of loans from central bank Net increase of inter bank loans from other financial bodies Cash received against original insurance contract Net cash received from reinsurance business Net increase of client deposit and investment Net increase of trade financial asset disposal Cash received as interest, processing fee, and commission Net increase of inter bank fund received Net increase of repurchasing business Tax returned Other cash received from 240,419,816.48 23,356,060.47 79,564,934.65 8,099,836.87 business operation Subtotal of cash inflow 1,187,341,928.26 23,816,346.87 1,189,512,945.23 8,386,051.67 from business activities Cash paid for purchasing 166,095,010.05 133,016,125.72 of merchandise and services Net increase of client trade and advance Net increase of savings in central bank and brother 75 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot company Cash paid for original contract claim Cash paid for interest, processing fee and commission Cash paid for policy dividend Cash paid to staffs or paid 108,991,188.24 26,021,014.46 100,185,704.22 24,432,916.79 for staffs Taxes paid 129,202,410.63 298,210.24 169,456,686.94 257,443.54 Other cash paid for 193,255,200.10 35,664,498.28 96,029,224.66 57,413,414.88 business activities Subtotal of cash outflow 597,543,809.02 61,983,722.98 498,687,741.54 82,103,775.21 from business activities Cash flow generated by 589,798,119.24 -38,167,376.11 690,825,203.69 -73,717,723.54 business operation, net II. Cash flow generated by investing Cash received from investment retrieving Cash received as investment 310,194,494.71 670,280,660.50 88,707,244.26 411,390,807.82 gains Net cash retrieved from disposal of fixed assets, 10,312,640.00 18,303,517.94 3,280,137.94 intangible assets, and other long-term assets Net cash received from disposal of subsidiaries or other operational units Other investment related cash received Subtotal of cash inflow due 320,507,134.71 670,280,660.50 107,010,762.20 414,670,945.76 to investment activities Cash paid for construction of fixed assets, intangible 1,235,736,831.84 1,077,631.00 231,618,074.27 599,451.00 assets and other long-term assets Cash paid at investment 321,251,100.00 321,251,100.00 Net increase of loan against pledge Net cash received from subsidiaries and other operational units 76 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot Other cash paid for investment activities Subtotal of cash outflow due 1,556,987,931.84 322,328,731.00 231,618,074.27 599,451.00 to investment activities Net cash flow generated -1,236,480,797.13 347,951,929.50 -124,607,312.07 414,071,494.76 by investment III.Cash flow generated by financing Cash received as investment Incl: Cash received as investment from minor shareholders Cash received as loans 2,948,324,803.54 500,000,000.00 Cash received from bond placing Other financing –related cash received Subtotal of cash inflow 2,948,324,803.54 500,000,000.00 from financing activities Cash to repay debts 1,568,324,803.54 950,000,000.00 300,000,000.00 Cash paid as dividend, 573,185,030.69 303,404,492.29 416,841,485.99 213,915,701.62 profit, or interests Incl: Dividend and profit paid by subsidiaries to minor shareholders Other financing –related cash received Subtotal of cash outflow 2,141,509,834.23 303,404,492.29 1,366,841,485.99 513,915,701.62 due to financing activities Net cash flow generated by 806,814,969.31 -303,404,492.29 -866,841,485.99 -513,915,701.62 financing IV. Influence of exchange rate alternation on cash and -31,868.42 -31,868.42 524,078.09 524,078.09 cash equivalents V.Net increase of cash and 160,100,423.00 6,348,192.68 -300,099,516.28 -173,037,852.31 cash equivalents Add：Balance of cash and cash equivalents at the 190,665,302.76 34,847,364.21 490,764,819.04 207,885,216.52 beginning of term VI. Balance of cash and cash 350,765,725.76 41,195,556.89 190,665,302.76 34,847,364.21 equivalents at the end of term 77 G u a n g d o n g P r o v i n c i a l E x p r e s s w a y D e v e l o p m e n t C o . , L t d 4. Change in owners’ equities(Cont.d) Amount of the current term Owners’ Equity attributable to Parent Company Item Practical capital Less：Shares Surplus Common risk Attributab Capital reserves collected in stock reserves provision profit I. Balance at the end of last year 1,257,117,748.00 1,534,906,856.32 43,852,074.48 488,675,530 Add：Change of accounting policy Correcting previous errors Other II. Balance at the beginning of current year III. Changed in the current year（“-”for 1,257,117,748.00 1,534,906,856.32 43,852,074.48 488,675,530 decrease） （I）Net profit 48,069,427.25 48,483,223 （II）Gains losses accounted into owners’ equity directly 1．Change in fair value of sellable financial assets, net 2．Influence of change in other owners’ equity of invested enterprises on equity basis 3．Influence of income tax related to owners’ equity items 4．Other 78 G u a n g d o n g P r o v i n c i a l E x p r e s s w a y D e v e l o p m e n t C o . , L t d Total of (I) and (II) 398,260,910 （III）Investment or decreasing of capital by owners 1.Investment by owners 2．Amount of shares paid and accounted as owners’ equity 3．Other （IV）Profit allotment 48,069,427.25 -349,777,686 1．Providing of surplus reserves 48,069,427.25 -48,069,427 2.Providing of common risk provisions 3．Allotment to the owners(or -301,708,259 shareholders) 4．Other （V）Internal transferring of owners’ equity 1．Capitalizing of capital reserves （Or to capital ） 2．Capitalizing of surplus reserves （Or to capital shares） 3．Making up losses by surplus reserves 4. Other IV.. Balance at the end of this term 1,257,117,748.00 1,534,906,856.32 91,921,501.73 537,158,754 79 G u a n g d o n g P r o v i n c i a l E x p r e s s w a y D e v e l o p m e n t C o . , L t d Change in owners’ equities(Cont.d) Amount of last year Owners’ Equity attributable to Parent Company Item Less： Practical capital Capital Surplus Common risk Attributa Shares in collected reserves reserves provision profit stock I. Balance at the end of last year 1,257,117,748.00 1,534,906,856.32 464,520,618.07 654,130,59 Add：Change of accounting policy -464,520,618.07 -401,554,95 Correcting previous errors Other II. Balance at the beginning of current year 1,257,117,748.00 1,534,906,856.32 252,575,63 III. Changed in the current year（“-”for 43,852,074.48 236,099,89 decrease） （I）Net profit 493,661,98 （II）Gains losses accounted into owners’ equity directly 1．Change in fair value of sellable financial assets, net 2．Influence of change in other owners’ equity of invested enterprises on equity basis 3．Influence of income tax related to owners’ equity items 4．Other 80 G u a n g d o n g P r o v i n c i a l E x p r e s s w a y D e v e l o p m e n t C o . , L t d Total of (I) and (II) 493,661,98 （III）Investment or decreasing of capital by owners 1.Investment by owners 2．Amount of shares paid and accounted as owners’ equity 3．Other （IV）Profit allotment 43,852,074.48 -257,562,09 1．Providing of surplus reserves 43,852,074.48 -43,852,07 2.Providing of common risk provisions 3．Allotment to the owners(or -213,710,01 shareholders) 4．Other （V）Internal transferring of owners’ equity 1．Capitalizing of capital reserves（Or to capital ） 2．Capitalizing of surplus reserves （Or to capital shares） 3．Making up losses by surplus reserves 4. Other IV.. Balance at the end of this term 1,257,117,748.00 1,534,906,856.32 43,852,074.48 488,675,53 5. Change in owners’ equities of Parent company 81 G u a n g d o n g P r o v i n c i a l E x p r e s s w a y D e v e l o p m e n t C o . , L t d Amount of the current term Items Practical capital Capital reserves Less：Shares in stock Surplus reserve collected I. Balance at the end of last year 1,257,117,748.00 1,534,906,856.32 43,852,074 Add：Change of accounting policy Correcting previous errors Other II. Balance at the beginning of current year 1,257,117,748.00 1,534,906,856.32 43,852,074 III. Changed in the current year（“-”for decrease） 48,069,427 （I）Net profit （II）Gains losses accounted into owners’ equity directly 1．Change in fair value of sellable financial assets, net 2．Influence of change in other owners’ equity of invested enterprises on equity basis 3．Influence of income tax related to owners’ equity items 4．Other Total of (I) and (II) （III）Investment or decreasing of capital by owners 1.Investment by owners 2．Amount of shares paid and accounted as owners’ equity 3．Other （IV）Profit allotment 48,069,427 1．Providing of surplus reserves 48,069,427 82 G u a n g d o n g P r o v i n c i a l E x p r e s s w a y D e v e l o p m e n t C o . , L t d 2.Providing of common risk provisions 3．Allotment to the owners(or shareholders) 4．Other （V）Internal transferring of owners’ equity 1．Capitalizing of capital reserves（Or to capital ） 2．Capitalizing of surplus reserves （Or to capital shares） 3．Making up losses by surplus reserves 4. Other IV.. Balance at the end of this term 1,257,117,748.00 1,534,906,856.32 91,921,501 83 G u a n g d o n g P r o v i n c i a l E x p r e s s w a y D e v e l o p m e n t C o . , L t d Change in owners’ equities of parent company (Cont.d) Amount of last year Items Practical capital Capital reserves Less：Shares in stock Surplus reserves collected I. Balance at the end of last year 1,257,117,748.00 1,534,906,856.32 464,520,618 Add：Change of accounting policy -464,520,618 Correcting previous errors Other II. Balance at the beginning of current year 1,257,117,748.00 1,534,906,856.32 III. Changed in the current year（“-”for decrease） 43,852,074 （I）Net profit （II）Gains losses accounted into owners’ equity directly 1．Change in fair value of sellable financial assets, net 2．Influence of change in other owners’ equity of invested enterprises on equity basis 3．Influence of income tax related to owners’ equity items 4．Other Total of (I) and (II) （III）Investment or decreasing of capital by owners 1.Investment by owners 2．Amount of shares paid and accounted as 84 G u a n g d o n g P r o v i n c i a l E x p r e s s w a y D e v e l o p m e n t C o . , L t d owners’ equity 3．Other （IV）Profit allotment 43,852,074 1．Providing of surplus reserves 43,852,074 2.Providing of common risk provisions 3．Allotment to the owners(or shareholders) 4．Other （V）Internal transferring of owners’ equity 1．Capitalizing of capital reserves（Or to capital ） 2．Capitalizing of surplus reserves （Or to capital shares） 3．Making up losses by surplus reserves 4. Other IV.. Balance at the end of this term 1,257,117,748.00 1,534,906,856.32 43,852,074 85 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot Guangdong Provincial Expressway Development Co.Ltd. Notes to the Financial Statements I. Company Profile 1.The Company was established in February 1993, which was originally named as Guangdong Fokai Expressway Co., Ltd. On June 30, 1993, it was renamed as Guangdong Provincial Expressway Development Co., Ltd. after reorganization pursuant to the approval of the Office of Joint Examination Group of Experimental Units of Share Holding System with YLSB (1993)No. 68 document. The share capital structure after reorganization is as follows: Composition of state-owned shares: The appraised net value of state-owned assets of Guangdong Jiujiang Bridge Co. and Guangfo Expressway Co., Ltd. as of January 31, 1993 confirmed by Guangdong State-owned Asset Management Dept., i.e.,RMB 418.2136 million, was converted into 155.025 million shares. Guangdong Expressway Co. invested cash of RMB 115 million to subscribe for 35.9375 million shares. Other legal persons invested cash of RMB 286.992 million to subscribe for 89.685 million shares. Staff of the Company invested RMB 87.008 million to subscribe for 27.19 million shares. The total is RMB 307.8375. 2． Pursuant to the approval of Guangdong Economic System Reform Committee and Guangdong Securities Regulatory Commission with YTG (1996) No. 67 document, part of the shareholders of non-state-owned legal person shares transferred 20 million non-state-owned legal person shares to Malaysia Yibao Engineering Co., Ltd. in June 1996. Pursuant to the approval of Securities Commission under the State Council with WF (1996) No. 24 approval document and that of Guangdong Economic System Reform Committee with YTG (1996) No. 68 document, the Company issued 135 million domestically listed foreign investment shares (B shares) to overseas investors at the price of HKD 3.54 (equivalent to RMB 3.8) with the par value of each share being RMB 1 during June to July 1996. 4. Pursuant to the reply of the Ministry of Foreign Trade and Economic Cooperation of the People’ s Republic of China with (1996) WJMZYHZ No. 606 document, the Company was approved to be a foreign-invested joint stock company limited. 5．The Company distributed dividends and capitalized capital common reserve for the year 1996 in the following manner: The Company paid 1.7 bonus shares for each 10 shares and capitalized capital common reserve on 3.3-for-10 basis. 6. Pursuant to the approval of China Securities Regulatory Committee (CSRC) with ZJFZ (1997) No. 486 and No. 487 document, the Company issued 100 million public shares (A shares) at the price of RMB 5.41 in term of “payable in full on application, pro-rate placing and subject to refund” with the par value of each share being RMB 1 in January 1998. 7．In accordance with the Resolutions of the 1999 Shareholders’ General Meeting of the Company and pursuant to the approval of Guangzhou Securities 86 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot Regulatory Office under CSRC with GZZJH (2000) No. 99 and that of CSRC with ZJGSZ (2000) No. 98, the Company offered 3 Rights for every 10 shares of 764.256249 million shares at the price of RMB 11 per Right.73,822,250 ordinary shares were actually placed to all shareholders. 8. Pursuant to the reply of the General Office of the People’ s Government of Guangdong Province with YBH (2000) No. 574 document, the state-owned shares were transferred to Guangdong Communication Group Co., Ltd. (Group Co.) for holding and management without compensation. 9.Pursuant to the approval of Shenzhen Stock Exchange, 53.0205 million staff shares of the Company (132,722 shares held by directors, supervisors and senior executives are temporarily frozen) were listed on February 5, 2001. 10.In accordance with the resolutions of 2000 annual shareholders’ general meeting, the Company capitalized capital common reserve into 419,039,249 shares on 5-for-10 basis with the total share capital as of the end of 2000, i.e., 838,078,499 shares as base. The date of stock right registration was May 21, 2001. The ex-right date was May 22, 2001. 11． On March 8, 2004,As approved by China Secu rities Regulato ry Co mmission b y do cu ment Zheng -Jian -Gong -Si-Zi [ 2003]No.3, the 45,000,000 non-negotiable fo reign sh ares were placed in Shenzhen Stock 12. On December 21, 2005, the Company's plan for share holding structure reform was voted through at the shareholders' meeting concerning A shares. On January 26 2006, The Ministry of Commerce of PRC issued “The approval on share converting of Guangdong Provincial Expressway Development Co., Ltd.” to approve the share equity relocation and transformation. On October 9 2006, according to the “Circular about implementing of share equity relocation and relative trading” issued by Shenzhen Stock Exchange, the abbreviation ID of the Company’s A shares was restored from “G-Expressway” “Expressway A”. 13. The former present Chao Xiaofeng had quited his position for six months, 18,078 shares of “shares held by domestic natural person” held by him were unfreezen; The 4490 shares held by Mr. Chen Chuxuan, the new Chairman of the Supervisory Board of the Company, were transferred from shares without limited sale condition to shares with limited conditions. As of December 31, 2008, The number of executives shares 270,155 shares. 14. The Company is mainly engaged in the construction of expressways, grade highways and bridges, tolling and maintenance management of highways and bridges, salvation, repair, maintenance and cleaning of automobiles and concurrently engaged in automobile transport and warehousing supporting its business. The Company is mainly engaged in tolling and maintenance of Guangfo Expressway, Fokai Expressway and Jiujiang Bridge, investment in technological industries and provision of relevant consultation while investing in Shenzhen Huiyan Expressway Co., Ltd., Guangdong Maozhan Expressway Co.,Ltd, Guangzhou Guanghui Expressway Co., Ltd.,Jingzhu Expressway Guangzhu Co., Ltd.,Guangdong Jiangzhong Expressway Co., Ltd., Zhaoqing Yuezhao Expressway Co., Ltd.,Ganzhou Kangda Expressway , Ganzhou Gankang Expressway Co., Ltd., Huaxia Securities Co., Ltd and Huazheng Asset Management Co., Ltd. Guangdong Expressway Technology Investment Co., Ltd. invested on establishing of Guangzhou Putian Zhongzhi Technologies & Industry Co., Ltd., Kunlun Securities Co., Ltd., Beijing Gelin Engze Fertilizer Ltd., and Guangzhou Xinglu Transportation Tech Ltd. II. Principal accounting policies, accounting estimates and early errors (1). Statement on the Accounting Standard Followed by the Company 87 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot The financial statements prepared by the Company comply with the requirements of corporate accounting standards. They truly and completely reflect the financial situations, operating results, equity changes and cash flow, and other relevant information of the company. (2). Basis of Preparation On the basis continuous operation, in accordance with actual transactions and events, On February 15th 2006, the Minister of Finance issued the 38 detailed standards including “Enterprise Accounting Standard – Basic Criteria” and “Enterprise Accounting Standard – Inventory”. On October 30 2006, the “Enterprise Accounting Standard – Application Guide” was released, on November 16, 2007, Explanation to Enterprise Accounting Standards No. 1 was issued. which made the new accounting standard a completed system. The Company started to adopt the newly revised Enterprise Accounting Standard since January 1 2007. （3） Fiscal Year The Company adopts the Gregorian calendar year commencing on January 1 and ending on December 31 as the fiscal year. （（（ （4）Standard currency for bookkeeping The Company takes RMB as the standard currency for bookkeeping. （5） Report items with variable measurement properties and measurement properties adopted The Company takes the accrual system as the basis for book keeping. At measuring the accounting items, historic cost basis is normally adopted. (6)Determination of cash equivalent At preparing of cash flow statement, those investments, which are featured with short term (expire within 3 months since purchased), high liquidity, easy to convert to know cash, low in risk of value change, could be recognized as cash equivalents. Equity investment are not recognized as cash equivalents. (7)Accounting principle of foreign currency businesses When the Company and subsidiary companies in China have foreign currency businesses, they should be accounted by converting into the standard currency according to the exchange rate given by People's Bank of China. At the end of the year, the balance of foreign currency in foreign currency account should be adjusted according to the exchange rate at the end of the year, and if the conversion differences produced belong to the construction period, they should be included in the long-term deferred expenses; if they belong to exchange profit and loss from foreign currency special loan relating to purchase and construction of fixed assets, they should be treated according to the principle of capitalization of loan expenses, and the other part should be included in the profit and loss in the current year. (8) Accounting of financial assets and financial liabilities 1. Categories of financial assets and financial liabilities The Company divides the financial assets into four categories: financial assets measured at fair value and their variations are recognized as current gain/loss, including trade financial assets or financial liabilities and recognized directly as financial assets measured at fair value and their variations are recognized as current gain/loss; Investment hold till expiration; loans and account receivable; saleable financial assets .The company divides the financial liabilities into two categories: financial liabilities measured at fair value and their variations are recognized as current gain/loss; other financial liabilities. 2. Recognition and measurement of financial assets and liabilities (1) Financial assets and liabilities measured at fair value and their variations are recognized as current gain/loss 88 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot The fair value (after deducting of announced but not distributed cash dividend or due but not obtained bond interests) is recognized as initial amount when obtained. Interests or cash dividends during the period of holding are recognized as investment gains. The fair value will be adjusted and accounted as current gain/loss. When disposed, the differences between fair value and initial amount are recognized as investment gains, and thus adjust the gain/loss of fair value. (2) Investment hold till expiration The fair value (after deducting of due but not obtained bond interests) plus the related trade expenses is recognized as initial amount when obtained. Interest gains will be calculated at amortizing of costs and actual interest rate (the face rate is adopted when the difference between the actual rate and face rate is minor) during the period of holding, and accounted as investment gains. Actual rate is recognized when obtained, and is not changed in the predictable holding period or applicable shorter period. When disposed, the difference between the obtained price and book value is accounted as investment gains. If the company sells or reclassifies large-amount due investments before the expired date (large amount refers to comparing with the amount before the selling or reclassifying the investments), the company will reclassify the rest of the investments as financial assets for sale, and in the current accounting period or within two complete accounting years, no financial assets will be classified as holding due assets, except for the following situations: the sale date or reclassification date is close to the expired date of the investment (such as three months before the expired), and the change of interest rate has no significant influence on the fair value of the investment; after all the initial principal is mostly recovered according to periodic payments or repay in advance regulated in the contract, the rest part will be sold or reclassified; the sale and reclassification is caused by the independent events which are uncontrollable and unexpected and will not happen any more. (3) Account receivable and Loan The receivable debts of selling goods or providing services, and the credits of other company hold by the company not including the debt which has price in active market, including accounts receivable, notes receivable, prepaid accounts, other receivables, long-term receivables, etc. The contract or agreement price charging from purchaser should be taken as the initial confirmation amount; if it has the nature of financing, it should be confirmed according its current value. When retrieved or disposed of, the difference between the actual received amount and the book value is accounted as current gain/loss. (4) Saleable financial assets The fair value (after deducting of announced but not distributed cash dividend or due but not obtained bond interests) plus the related trade expenses is recognized as initial amount when obtained. Interest or cash dividend occurred during the period of holding is recognized as investment gains. Change of fair value is accounted as capital reserves (other capital reserves) at the end of term. When disposed, the difference between the obtained price and book value is accounted as investment gains. Meanwhile, the corresponding part of accumulated change of fair value accounted as owners’ equity is transferred into investment gain/loss. (5) Other financial liabilities Other financial liabilities are recognized initially at the sum of fair value and related trade expenses. Successive measurement will be on the basis of amortized costs. 3. Recognition and measurement basis of financial asset transposition When financial asset transposition occurred, the recognition of this particular financial asset is terminated if almost all risks and rewards attached to the asset have been transferred to the acceptor. If retain all the risks and rewards of ownership of financial assets, the 89 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot financial assets can be confirmed. When determine whether the transfer of financial assets meet the conditions of confirmation of the above financial assets, the principle of substance being more important than form should be adopted. The transfer of financial assets can be divided into overall transfer and part transfer of financial assets. If the transfer of financial assets meet the conditions of terminating confirmation, the following the difference of the two amounts will be included in the current profit and loss: (1) Book value of the financial asset to be transposed; (2) The sum of price received due to the transposition, and the accumulation of change in fair value originally accounted as owners’ equity (when the asset to be transposed is saleable financial asset). If part transfer of financial assets meet the conditions of terminating confirmation, the book value of the transferred financial assts, the difference between the confirmed part and the unconfirmed part (in this case, the service assets retained should be deemed as the part of unconfirmed financial assets), should be amortized in accordance with their relative fair value, and the difference between the following two amount should be included current profit and loss: ① Book value of the confirmed part; ②All fair values of financial assets and financial liabilities are recognized with reference to the price in the active market. If the transfer of financial assets does not meet the conditions of terminating confirmation, the financial assets should be confirmed again, the prices received will recognized as financial liabilities. (4) Recognition basis of financial assets and financial liabilities All fair values of financial assets and financial liabilities are recognized with reference to the price in the active market（Using valuation technique, etc）. (5) Impairment provision for financial assets ①Impairment provision for financial assets for sale: If the fair value of financial assets for sale greatly drops at the end of the period, or after considering all the relevant factors and expecting decrease trend is non-temporary, the impairment should be confirmed, and the accumulative loss formed by the decrease of fair value of owner’s equity originally included should be transferred out altogether and confirmed as impairment loss. ②Holding the impairment provision of expired investments: The measurement of holding the impairment provision of expired investment will be according to the method of the measurement of impairment provision for receivables. （9）Confirmation standards and accounting methods for provision for bad debts for receivables If there is objective evidence showing that receivables have impairment, its book value should be reduced to the recoverable amount, the reduced amount should be recognized as asset impairment loss, and included in the current gains and losses. The receivables of significant single amount (including accounts receivable, notes receivable, prepaid accounts receivable, other receivables, long-term receivables, and so on) should have separate impairment test. If there is objective evidence showing the occurrence of the impairment, the difference between the future cash flow value and the book value should be confirmed as impairment loss and account bad debts provision. 90 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot For the receivables of non-significant single amount, se the separate tests of impairment of receivables in accordance with aging as similar credit risk characteristics and divided into a number of combinations, and then the ratio of these receivables combination at the end of the period (can make individual impairment test) to calculate and determine impairment loss, and account bad debt provision. In addition to receivables that impairments have be separately accounted, the company bases on the same or similar in the previous years, and has the aging of the receivables of similar credit risk characteristics of the actual loss ratio. Determine the ratio of bad debt provision according to current situation: Age Proportion Within 1 year 0% 1－2 years 10% 2－3 years 30% 3－4 years 50% 4－5 years 90% Over 5 years 100% （10）Investories 1.Investories class Class: Material and low value consumable goods, etc. 2.Determination of account value of inventory received Various inventories should be accounted according to their actual costs. 3. Valuation method of inventory issued The issued inventory should be accounted by FIFO method. 4. Amortization method for low value consumable goods and packaging Low value consumable goods according to a reseller of martization 4. Amortization method for low value consumable goods and packaging Low value consumable goods according to a reseller of martization 5. Inventory system for stocks The company’s stock inventory system for sustainable use of the investory system. 6. Confirmation standards and accounting methods for inventory devaluation provision The inventory at period end should be valuated according to which is lower between cost and realizable net value. As inventory damage in whole or in part outdated and selling prices below cost and other reasons the stock can not be recovered, inventory devaluation provision should be accounted according to the difference between the cost of single inventory item and the net realizable value. For the inventories with of large quantity and low unit price, their costs and realizable net value according to inventory categories. If the influences of inventory value reduced before have disappeared, the reduced amount should be resumed and transferred back from the original inventory devaluation provision amount, the amount transferred back should be included in the current profit and loss. 7. Determination of realizable net value of inventory The realizable net value of inventory should be determined according to the estimated sale price deducting the estimated costs and the necessary sale expenses in the course of normal production and operation. （11）Accounting of long-term equity investment 1. Long-term equity investment （1）Initial measurement ①Long-term equity investment formed by merger For merger of enterprise under common control, merger cost is determined on equity combination basis. For equity investment paid by the Company in terms of cash, non-monetary asset, undertaking of debts, or issuing of equity securities, the initial cost will be the booking value 91 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot of the long-term investment provided by the enterprise to be merged at the day of merger. The differences between the initial investment cost of long-term investment and cash paid, the non-monetary asset transferred out or book value of debt undertaken and the total face value of shares placed, is used to adjust the capital reserves. When the capital reserve is not enough to cover the adjustment, the retained gains will be adjusted. All direct expenses attached to the merger are included in the gain/loss account of the current term. The corporate merger under same control: the merger cost determined according to on the purchase day should be the initial investment cost of long-term investment. (2) Long-term equity investment obtained by other ways Long-term equity investment obtained by cash payment is recognized for initial investment cost according to the price practically paid. Long-term equity investment obtained by placing of equity stocks is recognized for initial investment cost at the fair value of the stock. Long-term equity investment input by investors is recognized for initial investment cost according to the investment contract or agreement (less the cash dividend or profit announced but not distributed). However when the value in the contract or agreement is not fair value is not adopted. The non-monetary asset exchange for a commercial real income and assets or the fair value other assets can be reliably measured, the initial investment cost should be determined according to long-term equity investment exchanged through the non-monetary asset exchange, unless there is evidence showing that for the fair value of assets is more reliable; the non-monetary asset exchange which does not meet the above premises, the book value of the exchanged assets to and the relevant fees and taxes to be paid should be the initial investment cost of the long-term equity investment. The initial investment cost of the long-term equity investments obtained through debt restructuring should be determined in accordance with fair value. (2). The unit invested has the reference of common control and major impact According to the agreement in the contract, the common control of an economic activity will exist in the economic activities related to the important financial and operational decision needed to share control and the existence agreed by the investors will be taken as the joint control with the unit invested; has the right to participate in and decide the financial and operational decision, but if it can not control or joint control with other parties the formulation of these policies, it will be considered that the investing enterprise can exert significant impact on the unit being invested. (3) Follow-up measurement and revenue recognition If the company was able to joint control or exert significant impact on unit being invested, the initial investment cost should be greater than the difference of the fair value of the recognizable net value of the unit being invested, the initial investment cost of long-term equity investment will not be adjusted; if initial investment cost is smaller than the difference of the fair value of the recognizable net value of the unit being invested, it should be included in the current profit and loss. Accounting of long-term equity investment to subsidiaries is on cost basis. Whereas adjusted on equity basis when preparing of consolidated financial statements. Cost basis is adopted in accounting of long-term equity investment without joint control or major influence, and with no quotation in an active market, thus the fair value is not able to be reliably measured. 92 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot Equity basis will be adopted for the long-term equity investment with joint control or major influence. The investment income confirmed by cost method is only limited to distribution of accumulated net profit after the unit being invested receives investment, the part of profit and cash dividends more than the amount will be regarded as initial investment cost recovery. The loss which should be confirmed to the unit being invested under equity method should be treated in accordance with the following orders: First of all, deduct the book value of long-term equity investment. Second, if the book value of long-term equity investment can not be deducted, the long-term equity value of the net value of the unit being invested should be further confirmed as investment loss and used to deduct the book value of long-term receivables. Finally, after the above treatment, the additional liabilities to be undertaken according to investment contract or agreement should be confirmed as expected liability according to the expected liability and be concluded in the current investment loss. If the unit being invested achieves profit in the following period, after deducting the unconfirmed liabilities, it should be treated according to the adverse order as described above, the book value of the confirmed expected liabilities should be deducted, the book value of the long-term equity investment and long-term equity of net assets of the unit being invested should also be resumed, and at the same time, the investment income should be confirmed. The treatment for the other changes of owner’s equity besides net loss and profit of the unit being invested: for the other changes of owners’ equity besides net profit and loss of the unit being invested, when shareholding ratio remains unchanged, the part shared or undertaken according to share ratio, the book value of long-term equity investment should be adjusted, and at the same time, the capital surplus (other capital surplus). 2. Impairment provision fro long-term investment The long-term equity investment which calculated by cost and has no quotation in active market and its fair value can not be reliably calculated, its devaluation loss is determined according to the difference between it book value and the cash flow discount according to market income rate of the similar financial assets. Other long-term equity investment, if the measurement result of the recoverable amount shows that if the recoverable amount of the long-term equity investment is lower than its book value, the difference should be confirmed as impairment loss. The impairment loss of long-term equity investment will not be transferred back after confirmation. （12）Commissioned loan Commissioned loan should be accounted according to actual commissioned loan amount. Account receivable interest rate according to the interest rate stipulated in commissioned loan. Make overall inspection on the principal of commissioned loan on the balance sheet date, if there is evidence showing that the principal of commissioned loan is higher than the recoverable amount, impairment provision should be accounted on the commissioned loan. （13）Pricing and depreciation method for the Fixed asset 1.Fixed assets standard Fixed assets refer to physical assets owned for purpose of production, service providing, leasing or management, and operation with service life of more than one year. Fixed assets are recognized when all of the following conditions are satisfied: (1) Financial benefits attached to the fixed asset is possibly inflowing to the Company; (2) The cost of the fixed asset can be reliably measured. 2. Categories of fixed assets 93 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot Fixed assets are categorized as: Guangfo Expressway, Fokai Expressway, Jiujiang Bridge, house and building, Macnineryand equipment, vehicles, electronic and other equipment. 3. Confirmation standards and accounting methods for fixed asset valuation and impairment provision Fixed asset shall be accounted according to the its actual cost. On balance sheet date, the fixed assets should be checked item by item, the difference between recoverable amount and book value should be the impairment provision for fixed assets, and be included in the current profit and loss. Impairment provision for fixed assets should be accounted according to individual value. 4. Providing of fixed asset depreciation Except that depreciation of highways and bridges (Guangfo Expressway, Fokai Expressway and Jiujiang Bridge) are provided with the method of workload, the depreciation of fixed assets is provided with average serving life method, and provided according to categories. i.e. In addition to Guangfo Expressway, Fokai Expressway and Jiujian Bridge do not set aside residuals, the other projects should set aside 3% to 10 % as residuals. Depreciation ages and ratios of fixed assets: Type Service life Predicted retained Annual depreciation rate value rate Guangfo Expressway 28 years 0 Working flow basis Fokai Expressway 30 years 0 Working flow basis Jiujiang Bridge 19 years 0 Working flow basis House Building 20-30 years 3%—10％ 3.17%-4.75% Machine Equipment 10 years 3%—10％ 9％-9.6% Transportation Equipment 5-8 years 3%—10％ 11.88%-19% Electric Equipment and other 5-15 years 3%—10％ 6.33%-19.4% equipment （14）Calculation of Construction-in-process The projects in construction are the infrastructure works, installation works, technological transformation projects, big maintenance works of the company. After the delivery of the projects under construction, the actual expenses should be confirmed as fixed assets; and fixed assets constructed have reached the intended use state, but not completed. Since the date of reaching intended use state, they should be transferred to fixed assets and impairment provision should be accounted, and then process the completion budget procedures and then make adjustments. On the balance sheet date, conduct an overall inspection on projects under construction, if there is evidence showing that impairment has happened in the projects under construction, then account impairment provision on the projects under construction and included in the current profit and loss. The impairment provision for projects under construction should be accounted according to individual asset. （15）Calculation of intangible assets Intangible assets should be accounted according to the actual costs. Since the current month of obtaining the assets, they should be amortized according to the contract period or the expected period. The unforeseen intangible assets which bring economic benefits for enterprises will be regarded as the intangible assets of uncertain life, and will not be amortized. On the balance sheet date, check the capacity of bringing future economic 94 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot interests of all intangible asset, if the estimated recoverable amount is less than book value, the impairment provision for intangible assets should be accounted according to the difference between the recoverable amount and book value. （16）long-term amortizable expenses Long-term prepaid expenses refer to that enterprises have already spent, and amortization periods of all expenses are more than one year (excluding 1 year), they should be amortized in the regulated years. （17）Bood payable 1. Valuation of payable bonds When the company is issuing bonds, the total price issued should be included in the "payable bonds" subject. 2. Amortization method for bond premium or discount The difference between bond issuance total amount and the total amount of bond face value should be worked as bond premium or discount and be amortized within the bond period according to actual interest rate and vertical line method, and be treated according to borrowing costs described below. （18）Capitalizing of Loan expenses 1. Recognition principles for capitalizing of loan expenses Borrowing expenses occurred to the Company that can be accounted as purchasing or production of asset satisfying the conditions of capitalizing, are capitalized and accounted as cost of related asset. Other borrowing expenses are recognized as expenses according to the occurred amount, and accounted into gain/loss of current term. The assets meeting capital conditions refer to the fixed assets, investment real estates and inventories which are constructed or produced in a long time to reach the predicted use or sale state. When a loan expense satisfies all of the following conditions, it is capitalized: 1. Expenditures on assets have taken place, asset expenditures include the assets used to construct or produce the assets which meet the capitalization conditions, and expend by cash or transferring non-cash assets or bearing interest debt; 2. Loan costs have taken place; 3. The construction or production activities to make assets to reach the intended use or sale of state have begun. When the construction or production of the assets which meet the capitalization conditions was broken and the break time is more than three months, the capitalization of loan costs should be suspended. When the construction or production meets the intended use or sale of state of capitalization conditions, the Loan costs should stop capitalization. When the construction or production meets the conditions of capitalization and can be used individually, the capitalization of the loan costs of the assets should be stopped. 2. Duration of capitalization of Loan costs The capitalization period refers to the period from starting capitalization of loan costs to the stop of capitalization, the period of the break of capitalization of Loan costs is not included. 3. Calculation of the amount of capitalization of Loan costs Interest expense due to specialized Loan and its auxiliary expenses shall be capitalized before the asset which satisfies the capitalizing conditions reaches its useable or saleable status. Interest amount of common Loan to be capitalized equals to accumulated asset expense less weighted average of specialized loan part of asset expense multiplies capitalizing rate of common Loan occupied. Capitalizing rate is determined according to weighted average interest of common Loan. 95 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot If the Loan has discount or premium, the discount or premium amount should be determined according to actual interests in each accounting period. The interest amount should be adjusted in each period. （19）Recognizing of Income The incomes of the company mainly include: selling products, providing labor services. 1. The income from goods sale should be confirmed when meeting the following conditions: The company had transferred the ownership of the goods to the buyer, and the company did not retain the continuing management right relating to ownership right, and did not control the goods sold; the economic interests relating to transaction will go into the company; the company can reliably measure the related revenue and costs. 2. Principles for the confirmation of incomes from providing service are as follows: The service started and completed in the same accounting year should be confirmed upon the completion of labor income. If the beginning and completion of the service belongs to different accounting year, when the results of providing service transaction can be reliably estimated, on the balance sheet date, the company should confirm the relevant service income according to the completion percentage. When all the following conditions can be met, the results of the transaction can reliably estimated: (1). Total labor revenue and total labor costs can be reliably measured; (2). The economic benefits relating to transactions will flow into the enterprise; (3). The progress of completion of the service can be reliably identified. (XX）References for confirmation of deferred income tax assets The company is likely to determine the deferred income tax assets produced from deductible temporary differences with the limit of offsetting the taxable income of temporary difference. （ 20 ） Reasons for the changes of combination scope in the combined statement The event is not happened in the accounting period of the company. （21）Changing of main accounting policies, accounting estimations, and correcting of major accounting errors, and their influences No changing of main accounting policies, accounting estimations, and correcting of major accounting errors has happened in the report term. ( 22) Correct and Influence of main accounting policies, accounting estimations, and correcting of major accounting errors, and their influences 1. Changing of main accounting policies No changing of accounting estinations in report term. 2.Changing of Major accounting estimations No changing of accounting estinations in report term. 3. Correcting of major accounting errors in the report term. No changing of major accounting errors in the report term. III.Taxation (I)Turnover tax ans surcharges 1.Turnover tax Taxable Items Type of taxes Tax ratio Toll income Business tax 3% 96 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot Gains from rents Business tax 5% Gains from service providing Business tax 5% 2.Urban Maintenance and construction Tax Calculated and paid at 7% or 5% of the turnover tax. Foreign invested enterprise under the Company is exempted from urban mairtenance and construction tax according to the regulations. 3.Education surcharges Calculated and paid at 3% of the turnover tax. Foreign invested enterprise under the Company is exempted from education surcharges according to the regulations. (II) Enterprise income tax According to “Provisional Regulations of Enterprise Income Tax of PRC”, the Company pays enterprise income tax at 25%. According to “Provisional Regulations of Enterprise Income Tax of PRC”, Guangfo Expressway Co., Ltd. pays enterprise income tax. As approved by Guangzhou Tax Bureau Foreign Division with Shui-Wai-Fa[1993]1669, Guangfo Expressway Co., Ltd. pays enterprise income tax at 18% in 2008. According to “Provisional Regulations of Enterprise Income Tax of PRC”, Fokai Expressway Co., Ltd. pays enterprise income tax at 25%. According to “Provisional Regulations of Enterprise Income Tax of PRC”, Guangdong Expressway Technology Investment Co., Ltd. pays enterprise income tax at 25%. According to “Provisional Regulations of Enterprise Income Tax of PRC”, Guangdong Putian Zhongzhi Technology Investment Co., Ltd. pays enterprise income tax at 25%. IV.Enterprise Consolidated and Consolidated Financial Statement The consolidated financial statement should be implemented in accordance with Corporate Accounting Standards No. 33 - Consolidated Financial Statements issued on the February 2006. All subsidiaries controlled by the company should be included in the scope of consolidated financial statements. The consolidated financial statements should be on the basis of individual financial statement of the mother company and the consolidated subsidiaries, according to the relevant data and adjust the long-term equity investment of the subsidiaries according to equity method, and the parent company will prepare the consolidated financial statement. The internal equity investment and owner’s equity of subsidiaries, internal investment income and distribution of profits of subsidiary, internal transactions, internal debts and credits will be offset. The accounting policies adopted by subsidiaries should be in line with those of parent company. （I）Subsidiaries 1．Subsidiaries obtained through merger of enterprises under common control Registere Actual Balance Name of Registere Business d investment as of other Proporti Total of Consol Type Business Scope voting Subsidiaries d place property capital(R of the end of substan on share Statem MB’0000 current tial 97 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot )) term(RMB) investm ent, net West Limited Construction, tolling, Holdi Shabei, Liability maintenance and ng Company Guangfo Guangzho management of (Taiwan, Expressway subsid u Hongkong 20,000 Guangfo Expressway, 242,151,386.98 75% 75% Y Co., Ltd. iaries automobile fueling, and Macao salvage, maintenance in and cleaning up. cooperation Operation and management of Fokai Expressway and its supporting facilities, automobile salvage, maintenance and cleaning, supply of automobile parts and components, Holdi No.83 maintenance and Guangdong ng Limited Baiyun management of Jiujiang Fokai Expressway subsid Road,Yuexi Liability 110,800 Bridge of Guangzhan 1,579,807,995.45 75% 75% Y iaries u, Company Highway. Auto rescue Co., Ltd. Guangzhou and repair (operated by subsidiaries). Sales of industrial capital goods (excluding gold, silver, motor vehicles and dangerous chemicals), construction materials, department goods, needles, textiles, metals, cross-powers. 1. Judgment references for "Corporate Merger Under Same Control" Determine the references for “corporate merger under same control” according to Business Accounting Standards No. 20 – Corporate Merger the [2007] No.5 File by Ministry of Finance as follows: If the involved companies are controlled by the same party or the same parties and the control is not temporary, it is the corporate merger under same control. The same party refers to the investors involved in the merger and implementing ultimate control before and after the merger. Corporate merger under the same control refers to the merger of enterprises within the group, otherwise, can not be regarded as the corporate merger under same control. 2. Substantial dominator under common control For subsidiaries obtained under common control as provided above, the substantial dominator is Guangdong Communication Group Co., Ltd. （II）Subsidiaries obtained from merging of enterprises under different control Actual Regis investm Balance of Busines tered ent as Name of Registe other s capita Business of the Total of voting Consolidat Subsidiari Type red substantial Proportion ion propert l(RM Scope end of investment, share Statement es place y B’00 current net 00)) term(R MB) Owned 2011, Limited Researc Guangzho subsidi 2012 Liabilit h and u Putian ary of a Room, y 500 develop 1.00 3,000,000.00 60% 60% Yes Zhongzhi subsidi Huangp Compa u West ny ment of ary electroni 98 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot Actual Regis investm Balance of Busines tered ent as Name of Registe other s capita Business of the Total of voting Consolidat Subsidiari Type red substantial Proportion ion propert l(RM Scope end of share Statement es place investment, y B’00 current net 00)) term(R MB) Road, c Tianhe products District, and Guangz hou technica l service. Wholesa le trade. (III) Entities with special purpose and not consolidated Regis Actual Balance of Busin tered investment Name of Registe other ess capita as of the Total of voting Consolidat Subsidiari Type red Business Scope substantial Proportion ion prope l(RM end of share Statement es place investment, rty B’00 current net 00)) term(RMB) Investment in technical industries and provision of relevant consulting services, research and development of lighting technology of Cicy and Road, Hol 4/F,Guan energy saving dong Guangdo din Express Limite and storage ng g way d technology, Expresswa sub Builiding Liabili photovoltaic 10,000 95,000,000.00 95% 95% Yes y sidi , No.83 ty technology of Technolog arie Baiyun, Comp solar energy and y Yuexiu , any s production and Guangzh ou sales of relevant products, design, production, release and agency of all kinds of domestic and foreign advertisements, construction and maintenance management of 99 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot highway projects and domestic trade. (II) Minority shareholders’ equity and gain/loss 1. Minority shareholders’ equity Amount in Increase/decres Other Change Amount in Name year-begin es （Notes） year-end （1）Guangfo Expressway 117,598,717.80 29,393,572.72 -45,605,574.16 101,386,716.36 （2）Fokai Expressway 335,897,320.67 35,247,990.80 -46,301,260.36 324,844,051.11 (3)Guangdong Expressway Technology 496,438.49 -33,555.21 462,883.28 Total 453,992,476.96 64,608,008.31 -91,906,834.52 426,693,650.75 Note：Other changes are the part of dividends of subsidiaries attributable to minority shareholders in the accounting period. 2. Minority shareholders gain/loss Same period of the Items Report period previous year （1）Guangfo Expressway 29,393,572.72 46,536,300.17 （2）Fokai Expressway 35,247,990.80 50,916,291.38 (3)Guangdong Expressway Technology -33,555.21 -617,890.26 Total 64,608,008.31 96,834,701.29 V. Notes to the major items of consolidated financial stateme （I）Monetary Capital Amount in year-end Amount in year-begin Items Foreign Exchange Foreign Exchange RMB RMB currency rate currency rate Cash RMB 73,021.90 91,691.97 HKD Subtotal 73,021.90 91,691.97 Bank deposit RMB 349,774,544.88 189,152,397.47 HKD 600,206.25 0.88189 529,315.89 595,644.67 0.9353 557,130.29 Subtotal 350,303,860.77 189,709,527.76 Other currency RMB 388,843.09 864,083.03 HKD Subtotal 388,843.09 864,083.03 Total 350,765,725.76 190,665,302.76 Monetary Capital at the period end increased RMB 160,100,423.00, with an increase ratio of 83.97%, Main reasons for the increase as follows: the controlling subsidiary of the company increased long-term and short-term borrowings 100 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot for the construction expansion in the current period, so the fund balance left at period end increased. （2）Account receivable 1. Account receivable （1）Age analysis： Bad Bad debt Bad debt debt Proportio Bad debt povis povision povi Type Book Balance povision ion Book Balance Proportion Bad debt sion n Proport povision Propo ion rtion Within 1 year 12,654,511.88 82.81% 22,473,436.27 89.53% 1－2 years 2－3 years 3－4 years 4－5 years 2,626,994.04 10.47% 2,364,294.64 100% Over 5 years 2,626,994.04 17.19% 2,626,994.04 100% Total 15,281,505.92 100.00% 2,626,994.04 100% 25,100,430.31 100.00% 2,364,294.64 100% 101 G u a n g d o n g P r o v i n c i a l E x p r e s s w a y D e v e l o p m e n t C o . , L t d （2）Items analysis: Bad debt Bad debt Bad debt Bad debt Type Book Balance Proportion povision povision Book Balance Proportion povision povision Proportion proportion Significant account receivable of single amount 2.The receivables that the individual amount is not large but the risk is great ３ ． Other risks of credit features： Incl ： 14,240,911.70 93.19% 2,626,994.04 100% 23,906,406.01 95.24% 2,364,294.64 100% Singleaccoun t with lare amount Single 1,040,594.22 6.81% 1,194,024.30 4.76% minor accounts 102 G u a n g d o n g P r o v i n c i a l E x p r e s s w a y D e v e l o p m e n t C o . , L t d Bad debt Bad debt Bad debt Bad debt Type Book Balance Proportion povision povision Book Balance Proportion povision povision Proportion proportion Incl ： Single account without large amount but with greater risks after combined with credit features Total 15,281,505.92 100% 2,626,994.04 100% 25,100,430.31 100% 2,364,294.64 100% 103 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot 2. The changes of accounts receivable for bad debts are as follows: Amount Decreased Amount in current period Book balance at accounted in Book balance Periods Transf year begining current Resellin at period end erred period g back 2007 (last 1,313,497.02 1,050,797.62 2,364,294.64 period) 2008 (current 2,364,294.64 262,699.40 2,626,994.04 period) 3. There is no balance of account receivable due from shareholders holding 5% or over of shares at the end of term. 4. The balance of receivables of the related party is RMB 268,942.72, accounting for 1.76 % of the total receivables, details in the Notes 7(II)5 5. Accounts receivable at the end of the top five in the amount Relationship Debtor with the Amount Age Proportion Company Guangdong Union No relationship 11,613,917.66 Within 1 year 76.00% electric toll Co., Ltd. Nanhai Xintai No Information 2,626,994.04 Over 5 years 17.19% relationship Technology Co., Ltd. Guangdong No Hongzhiri 310,000.00 Within 1 year 2.03% relationship advertising Co., Ltd. Guangdong Lulutong No 237,939.72 Within 1 year 1.56% Co., Ltd. relationship Guangzhou No Zhongqiu advertsing 213,443.00 Within 1 year 1.40% Co., Ltd. relationship 6. The accounts receivable at the period end increased RMB 10,081,623.79, with an increase ratio of 44.34%, Reasons for the decrease are: the accounts receivable of the company at period end decreased because the separate settlement of the households at all sections was more timely and the fund transfer of network charge paid by the bill collection company is faster than last year. （III）Prepayment 1.. Age analysis Balance in year-end Balance in year-begin Age Amount Proportion Amount Proportion Within 1 year 84,897,505.90 99.78% 6,711,150.90 95.20% 1－2 years 190,071.00 0.22% 20,333.00 0.29% 2－3 years 318,154.60 4.51% Over 3 years Total 85,087,576.90 100.00% 7,049,638.50 100.00% 104 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot 2. The important advance payment with account age more than one year Amount Reasons for not being settled in time Guangzhou Maritime Court 169,738.00 Prepay the cost for court proceedings 3. Prepayment with large amount at the end of term （1）The top five Balance in year-end Balance in year-begin Arrearage units in Amount Proportion Amount Proportion total and 75,768,076.18 89.05% 5,751,839.25 81.59% proportion （2）Advance payment is the main unit Relationship with the Name Amount Time Cause Company Owned Guangdong Nanyue logistics subsidiary of Within 1 Material 37,149,367.98 Co., Ltd. parent company year advances Owned Guangdong Highway subsidiary of Within 1 Material 20,000,000.00 Construction Company. parent company year advances China Railway 12 Bureau Within 1 Material Group Co., Ltd GF02 No relationship 8,249,744.50 year advances Contract Section Owned Guangdong Changda subsidiary of Within 1 Material Highway Engineering Co., 5,196,417.20 parent company year advances Ltd. Jiangxi Times Road-bridge Engineering General Within 1 Material No relationship 5,172,546.50 Company. GF01 Contract year advances Section Manager Dept Owned Guangdong Guanyue subsidiary of Within 1 Material 3,942,162.30 Road-bridge Co., Ltd. parent company year advances Owned Guangdong Traffic subsidiary of Within 1 Material 1,375,790.00 Development Company parent company year advances 81,086,028.48 4. There were no important accounts Prepayment from the main shareholders of the Company holding nore than 5% (including 5%) of the total shares of the Company. 5. Prepayment of the related party is RMB 68,649,226.38, accounting for 80.68% of the total Prepayment , details in the Notes 7(II)5 6. Prepayment at the period end increased RMB 78,037,938.40, with an increase ratio of 1106.98%, Reasons for the increase: the expanded construction of Guangfo 105 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot and Fokai expressway, so the prepayment for project materials increased. （4）Dividend receivable Whether Reasons the Amount at relevant Decrease for not year Increase at Amount at funds Item at this being beginnin this period period end have period recovere signs for g d impairm ent 1.The dividends 14,970,025.14 14,970,025.14 No receivable with account age less than one year Of which: the dividend of 14,970,025.14 14,970,025.14 Unpaid No Guangzhu East in 2007 2. The dividends receivable with account age more than one year Total 14,970,025.14 14,970,025.14 Dividend receivable at the period end increased RMB 14,970,025.14, Reasons for the increase: the receivable dividends from Jingzhu Expressway Guangzhu Seciton Company increased in this period. （5）Other receivable 1. Account receivable （1）Age analyse：： Amount in year-end Amount in year-begin Bad Bad debt Bad debt debt Age Proportio Bad debt povis Proportio povision povis Book Balance povision ion Book Balance Bad debt ion n n Proport povision Proport ion ion Within 1 year 25,068,036.22 26.88% 102,000.00 0.16% 18,264,191.01 20.73% 192,000.00 0.29% 1－2 years 315,250.00 0.34% 192,000.00 0.30% 4,248,589.02 4.82% 222,249.70 0.34% 2－3 years 3,296,930.21 3.54% 219,754.00 0.34% 3,625,904.29 4.11% 3,272,990.51 5.00% 3－4 years 3,312,635.05 3.55% 3,284,317.53 5.06% 8,645,993.82 9.81% 8,487,330.00 12.95% 4－5 years 8,634,938.88 9.26% 8,505,980.55 13.10% 51,872,346.59 58.87% 51,872,346.59 79.18% Over 5 years 52,631,996.67 56.43% 52,631,996.67 81.04% 1,470,000.00 1.67% 1,470,000.00 2.24% Total 93,259,787.03 100.00% 64,936,048.75 100% 88,127,024.73 100% 65,516,916.80 100% 106 G u a n g d o n g P r o v i n c i a l E x p r e s s w a y D e v e l o p m e n t C o . , L t d （2）Items analysis: Bad Bad debt debt Proporti Bad debt povis Proporti Bad debt povis Type Book Balance povision ion Book Balance povision ion on on Proport Proport ion ion 1.Significant 63,193,504.78 67.76% 63,193,504.78 97.32% 51,683,774.79 58.65% 51,683,774.79 78.89% account receivable of single amount 2.The receivables that the individual amount is not large but the risk is great ３．Other risks 30,066,282.25 32.24% 1,742,543.97 2.68% 36,443,249.94 41.35% 13,833,142.01 21.11% of credit features： Incl ： Singleaccount with lare amount Single 30,066,282.25 32.24% 1,742,543.97 2.68% 36,443,249.94 41.35% 13,833,142.01 21.11% minor accounts 107 G u a n g d o n g P r o v i n c i a l E x p r e s s w a y D e v e l o p m e n t C o . , L t d Incl ： Single account without large amount but with greater risks after combined with credit features Total 93,259,787.03 100% 64,936,048.75 100% 88,127,024.73 100% 65,516,916.80 100% 108 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot 2. The changes of accounts receivable for bad debts are as follows: Amount reduced in Amount current period Book balance at accounted in Book balance Periods Rese year begining current Transferr at period end llin period ed back g 2007 (last 58,415,944.54 7,100,972.26 65,516,916.80 period) 2008 (current 65,516,916.80 129,481.87 710,349.92 64,936,048.75 period) 3.The other receivables with significant single amount at period end or not significant but accounting provision for impairment separately: Ratio Amount for Other receivables Book balance accounte preparation Reasons d for bad debt Kunlun Securities Co., Ltd.. 50,973,424.87 100% 50,973,424.87 Note 1 Beijing Gelin Enze 12,220,079.91 100% 12,220,079.91 Note 2 Total 63,193,504.78 63,193,504.78 Notes1: The parent company once paid RMB33.683,774.79 into KunLun Stock Co, Ltd, Guangdong expressway technology investment Co, Ltd once paid RMB18.000,000.00 into KunLun Stock Co, Ltd. QingHai Province XiNing City’s intermediate people's court made a adjudication under law declared that KunLun Stock Co, Ltd went bankrupt and repaid debt in November 11, 2006. On March 2007,My company and Guangdong Expressway Technology investment Co, Ltd had switched the money that paid into KunLun Stock Co, Ltd to other account receivable, and follow the careful principle to doubtful debts provision.The RMB 710,349.92 credit was recovered in the current period, and the provision for bad debt is deducted. 2: GuangDong Expressway technology investment Co, Ltd should charge Beijing Green EnZhe Organic fertilizer Co, Ltd for RMB 12,118,079.91. Eight millions of it was entrust loan, three millions was temporary borrowing, the rest of it was advance money for another. Beijing Green EnZe Organic fertilizer Co, Ltd’s operating status was bad and had already ceased producing, Accordingly, the controlling subsidiary of the company Guangdong Gaoshu Investment Co., Ltd. accounted full provision for bad debt RMB 12,118,079.91 Provision . 4. Provision for bad debts have been fully accounted or accounted a large proportion in prior years, and other receivables were also recovered in full or in part in this period. Reasonabi Credit Reasons for lity for amount Recovering original Debtor's name the original recovered or method estimated estimated reorganized proportion proportion Kunlun Securities Co., Ltd. 710,349.92 Transferred Details see Reasonabl back by the Note 1 e liquidation above team 109 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot 5. There were no other receivable from the main shareholders of the Company holding nore than 5% (including 5%) of the total shares of the Company. 6. The balance of receivables of the related party is 12,977,252.57, accounting for 13.92 % of the total receivables, details in the Notes 7(II)5 7. Accounts receivable at the end of the top five in the amount Relationship Debtor with the Property Amount Age Proportion Company Kunlun Securities No 50,973,424.87 Over 5 54.66% Deposit,etc. Co., Ltd. relationship years Joint Entrusted loans, The provisional Beijing Gelin Enze venture 12,220,079.91 1－5 years 13.10% Revolving loans, Current fund Guangfa Securities No details in the 3,072,000.00 2－3 years 3.29% Co., Ltd. relationship Notes 11(4) Guangdong Union No Within 1 Current fund 1,603,150.31 1.72% electric toll Co., Ltd. relationship year Heshan communications No Over 5 Real estate Current fund 1,470,000.00 1.58% Development relationship years Company 8. Other receivables at period end increased RMB 5,713,630.35 than at period beginning, with an increase ratio of 25.27%, Reasons for the increase: Fokai Expansion Office increased the insurance premiums paid for construction units. （VI）Inventory and inventory depreciation reserves Balance in year-end Balance in year-begin Item Bad debt Bad debt Book balance povision Book balance povision Rew materials 88,398.72 88,040.81 In product Finished products Store goods 317,312.80 52,665.72 Turnover Material Consumption of biological assets Total 405,711.52 140,706.53 Inventory at the period end increased RMB 265,004.99, with an increase ratio of 188.34% （7）Long-term equity investment Balance in year-end Balance in year-begin Items Bad debt Bad debt Book balance povision Book balance povision Equity method: Long-term equity investment Partnership 960,630,468.57 1,048,626,596.88 110 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot Balance in year-end Balance in year-begin Items Bad debt Bad debt Book balance povision Book balance povision Affiliated company 1,235,403,805.11 803,630,502.66 2,196,034,273.68 1,852,257,099.54 Cost method: Long-term equity investment 37,020,000.00 36,793,200.00 37,020,000.00 36,793,200.00 2,233,054,273.68 36,793,200.00 1,889,277,099.54 36,793,200.00 111 G u a n g d o n g P r o v i n c i a l E x p r e s s w a y D e v e l o p m e n t C o . , L t d 1. Information of Joint venture and Associated Enterprise Registered Legal Register V Name Type Property Proportion place Representative capital pro I. Partnership 1. Guangdong Limited liability Guangzhou, Expressway Liu Gangliang 2,351,678,000.00 30% 3 Guanghui Company Guangdong Management Expressway Limited liability 2. Zhaoqing Company(Taiwan, Yuezhao Zhaoqing, Expressway Hong Kong and Wang Jiachen 818,300,000.00 25% 2 Highway Macao and in Guangdong Management Co., Ltd. cooperation） 3. Limited liability Guangzhou, Software Guangzhou Zhang Yi 2,000,000.00 40% 4 Company Guangdong Development Xinlu Organic 4. Beijing Limited liability fertilizer Beijing Wang Jianji 20,000,000.00 35% 3 Gelin Company production and sell 2. Affiliated company 1.Shenzhen Huiyan Limited liability Shenzhen, Expressway Xu Xiaoyang 36,000,000.00 33.33% 33 Expressway Company Guangdong Management Co., Ltd. 2.Guangdong Maozhan Limited liability Guangzhou, Expressway Li Jinfeng 1,120,000,000.00 20% 2 Expressway Company Guangdong Management Co., Ltd. 3.Jingzhu Limited liability Guangzhou, Expressway Lu Yaxing 580,000,000.00 20% 2 Exprwssway Company(Taiwan, Guangdong Management 112 G u a n g d o n g P r o v i n c i a l E x p r e s s w a y D e v e l o p m e n t C o . , L t d Registered Legal Register V Name Type Property Proportion place Representative capital pro Guanzhu Hong Kong and Macao and in cooperation） 4.Guangdong Jiangzhong Limited liability Guangzhou, Expressway Lu Yaxing 1,015,000,000.00 15% 1 Expressway Company Guangdong Management Co., Ltd. 5.Ganzhou Other Limited Ganzhou, Expressway Kangda Yao Diming 600,000,000.00 30% 3 Expressway liability Company Jiangxi Management 6.Ganzhou Limited liability Gankang Company Ganzhou, Expressway （State-owned Liu Zequan 100,000,000.00 30% 3 Expressway Jiangxi Management Co., Ltd. holding） Related Organi Total party zation Total assets relation Name liabilities Total income Net profit Code at the end ship at the end I.Partnership 1.Guangdong Guanghui 70768541 6,654,896,901.62 4,227,471,825.60 1,258,117,577.00 383,657,456.37 Partnership Expressway Co., 0 Ltd. 2. Zhaoqing 70815700 Yuezhao Highway 2,416,785,864.63 1,557,973,622.29 288,024,927.97 18,226,821.24 Partnership -3 Co., Ltd. 75941162 3. Guangzhou Xinlu 4,490,263.60 1,813,213.84 3,654,679.74 -818,614.54 Partnership -2 4. Beijing Gelin 25,925,805.89 16,707,626.85 -665,000.70 Partnership 73559604 113 G u a n g d o n g P r o v i n c i a l E x p r e s s w a y D e v e l o p m e n t C o . , L t d Related Organi Total party zation Total assets relation Name liabilities Total income Net profit Code at the end ship at the end 4 2. Affiliated company 1.Shenzhen Huiyan 19220379 603,726,769.95 32,939,450.09 306,027,397.16 187,029,583.20 Affiliated Expressway 2 2. Guangdong 70766863 Maozhan 2,852,821,608.81 2,240,552,355.78 336,300,101.50 10,469,289.30 Affiliated -7 Expressway 3. Jingzhu 61740144 Exprwssway 4,362,066,257.57 2,826,909,954.50 1,065,302,983.53 541,538,820.82 Affiliated 5 Guanzhu 4.Guangdong Jiangzhong 74296235 2,795,270,504.80 1,900,512,199.17 251,226,509.74 -24,549,344.93 Affiliated Expressway Co., -6 Ltd. 5.Ganzhou Kangda 77239039 1,922,655,922.76 1,445,672,760.29 11,572,868.00 -75,751,245.95 Affiliated Expressway -5 6.Ganzhou Gankang 79946719 Expressway Co., 886,183,441.51 536,183,441.51 Affiliated -6 Ltd. 114 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot 2. Long- term s equity investment- Equity method Increase/ decrease in the amount of current Equity Initial Balance in Balance in Name amount Of which： year-begin year-end Total Return Cash dividend I.Partnership 1.Guangdong Guanghui Expressway Co., Ltd. 678,000,000.00 699,367,285.91 28,860,236.91 86,237,000.00 728,227,522.82 2. Zhaoqing Yuezhao Highway Co., Ltd. 183,690,616.22 227,501,052.51 3,831,073.35 231,332,125.86 3. Guangzhou Xinlu 800,000.00 1,398,265.71 -327,445.82 1,070,819.89 4. Beijing Gelin 6,614,483.90 2. Affiliated company 1.Shenzhen Huiyan Expressway 14,024,586.42 207,704,279.65 921,515.27 60,000,000.00 208,625,794.92 2. Guangdong Maozhan Expressway 224,000,000.00 120,359,992.75 2,093,857.86 122,453,850.61 3. Jingzhu Exprwssway Guanzhu 66,779,449.38 458,030,075.41 14,605,253.30 85,970,025.14 472,635,328.71 4.Guangdong Jiangzhong Expressway Co., Ltd. 104,650,000.00 137,896,147.60 -3,682,401.74 134,213,745.86 5.Ganzhou Kangda Expressway 216,251,100.00 192,475,085.01 192,475,085.01 6.Ganzhou Gankang Expressway Co., Ltd. 105,000,000.00 105,000,000.00 105,000,000.00 Total 1,599,810,235.92 1,852,257,099.54 343,777,174.14 232,207,025.14 2,196,034,273.68 Note：Because the change in shareholders of Guangdong Maozan Expressway Co., Ltd., after the change, Guangdong Provincial Expressway Co., Ltd., accounted for 8%, and the Company accounted for 2%, so this year, the company transferred from a joint owned enterprise to joint ventured enterprise. 3．Long- term s equity investment- Cost method Increase/ decrease in the amount of current Equity Initial Balance in Balance in Name amount Of which： year-begin year-end Total Return Cash dividend Huaxia Securities Co., Ltd. 5,400,000.00 5,400,000.00 5,400,000.00 Huazheng Assets Management 1,620,000.00 1,620,000.00 1,620,000.00 Co. Ltd. Kunlun Securities Co., Ltd. 30,000,000.00 30,000,000.00 30,000,000.00 Total 37,020,000.00 37,020,000.00 37,020,000.00 4. Provision for impairment of long-term equity investment Balance in Increase at Decrease at Balance in Name Causes year-begin this period this period year-end 115 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot Huazheng Assets Management 1,393,200.00 1,393,200.00 Note 1 Co. Ltd. Huaxia Securities Co., Ltd. 5,400,000.00 5,400,000.00 Note 2 Kunlun Securities Co., Ltd. 30,000,000.00 30,000,000.00 Note 3 Total 36,793,200.00 36,793,200.00 Note1 According to De Wei Ping Gu Zi 2005 No. 88 Appraisal Report issued by Beijing Dewei Appraisal Co., Ltd. As the June 30, 2005, the amount of net assets of Huazheng Asset Management Co., Ltd. in book was RMB 279.132 million and the appraised value was RMB - 2299.5486 million ,On October 14, 2005, Jianyin CITIC Asset Management Co., Ltd. issued the Letter of Soliciting Opinions on Equity Assignment to the Company. Jianyin CITIC Asset Management Co., Ltd. was willing to pay the price of not more than RMB 42 million to acquire 100% equity of Huazheng Asset Management Co., Ltd. and solicited the Company's opinions. The Company replied on December 5, 2005, abandoning the preemptive right under the same conditions. The Company made provision of RMB 1.3932 million for impairment in respect of this long-term equity investment of RMB 1.62 million. Note 2. The owner's equity of Huaxia Securities Co., Ltd. was negative and it entered liquidation procedure in December 2005. The Company made full provision for impairment in respect of this long-term equity investment of RMB 5.4 million. Note 3. The owner's equity of Kunlun Securities Co., Ltd. was negative and it entered liquidation procedure in October 2005. Guangdong Express Technology Investment Co., Ltd., a controlled subsidiary of the Company, made full provision for impairment in respect of its long-term equity investment of RMB 30 million in Kunlun Securities Co., Ltd. 5. The amount from beginning of the year to end-of-period of long term shared equity investment is increasing, the increasing money is RMB343,777,174.14, the increased proportion is 18.56%, the main reasons of increasing is that : In this period, RMB 216,251,100.00 investment was increased to Ganzhou Kangda Expressway Co., Ltd. and RMB 105,000,000.00 investment to Ganzhou Gankang Expressway Co., Ltd.; net profit of the units being invested increased, and the corresponding owner's equity increased. According to equity accounting method, the appropriate balance of long-term equity investment of the company also increased. （8）Original price of fixed assets and accumulated depreciation 1. Original price of fixed assets Balance in Increase at Decrease at Balance in Type year-begin this period this period year-end Guangfo Expressway 853,857,635.83 103,944,142.72 957,801,778.55 Fokai Expressway 3,184,687,149.28 379,647,905.26 11,810,000.00 3,552,525,054.54 House and Building 176,678,869.44 234,359.00 2,510,937.40 174,402,291.04 Machine equipment 12,468,742.68 533,650.00 13,002,392.68 Transportation 47,529,010.69 3,373,951.52 5,172,933.31 45,730,028.90 Equipment Electricity equipment and 173,936,626.98 13,059,373.15 16,092,883.74 170,903,116.39 other Total 4,449,158,034.90 500,793,381.65 35,586,754.45 4,914,364,662.10 Including：The original price of projects under construction transferred to fixed assets is RMB 321,761,860.86 . 2. Accumulated depreciation 116 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot Incre ase at Balance in Extraction at Decrease at Balance in Type this year-begin this period this period year-end perio d Guangfo Expressway 406,162,805.29 33,581,104.04 439,743,909.33 Fokai Expressway 717,180,428.34 82,441,175.35 2,965,570.34 796,656,033.35 House and Building 63,502,684.20 6,550,742.24 924,385.25 69,129,041.19 Machine equipment 3,259,304.72 183,767.36 3,443,072.08 Transportation 36,088,753.18 2,574,582.25 4,673,239.98 33,990,095.45 Equipment Electricity equipment 121,935,935.53 21,209,756.61 15,608,440.49 127,537,251.65 and other Total 1,348,129,911.26 146,541,127.85 24,171,636.06 1,470,499,403.05 3. Book vulue of fixed assets Balance in Increase at Decrease at Balance in Type year-begin this period this period year-end Guangfo Expressway 447,694,830.54 518,057,869.22 Fokai Expressway 2,467,506,720.94 2,755,869,021.19 House and Building 113,176,185.24 105,273,249.85 Machine equipment 9,209,437.96 9,559,320.60 Transportation 11,440,257.51 11,739,933.45 Equipment Electricity equipment 52,000,691.45 43,365,864.74 and other Total 3,101,028,123.64 3,443,865,259.05 4. The original value of Fixed assets at period end increased RMB 465,206,627.20 than at period beginning, with an increase ratio of 10.46%. Reasons for the increase: Nanhai yayao Interchange Project Construction Co., Ltd. adn Foshan Xiebian Interchange Project Construction Co., Ltd. made liquidation, and the physical capital recovered was transferred to the subject for accounting, Fokai Company increased repairing project to fixed assets. Accumulated depreciation at period end increased RMB 122,369,491.79 than the number at the beginning of the year, with an increase ratio of 9.08%.the reasons were: the depreciation accounted this year increased. 117 G u a n g d o n g P r o v i n c i a l E x p r e s s w a y D e v e l o p m e n t C o . , L t d （9）Construction on process 1.Change of Construction on process Decrease at this period Budget Balance in Increase at Name Switch to fixed Other Bala year-begin this period asset decrease Fokai Extension 4,002,000,000.00 170,964,954.59 546,394,342.84 Project Yayao to Xiebian 373,692,800.00 124,646,639.38 70,467,331.80 Extension Project Jiujiang Bridge Repair 93,160,441.66 42,829,368.55 Project Asphalt pavement repair 23,591,725.00 14,410,000.00 17,930,804.00 32,340,804.00 Project GuoG325Heshan Road 12,406,939.00 7,974,800.00 3,810,318.00 Repair Project Fokai Expressway repair 232,000,000.00 4,126,340.43 271,706,525.63 275,832,866.06 Project Simple video surveillance 2,131,679.00 1,258,269.00 825,368.00 2,083,637.00 systems engineering Yayao Station project logo 3,675,600.00 1,001,000.00 2,527,435.84 27,435.84 charges Shayong Toll Station 1,457,462.87 Shayong Toll station Extension 8,298,749.00 287,560.00 7,642,326.50 7,929,886.50 Project Surface of video surveillance and 750,086.00 6,637,692.00 1,354,506.00 intelligence board G325 Jiujiang Bridge Toll 4,017,746.00 station extension Hengsha New staff 8,000,000.00 209,833.29 3,707,451.57 quartersBuilding project G325 Jiujiang Bridge 1,770,000.00 119 G u a n g d o n g P r o v i n c i a l E x p r e s s w a y D e v e l o p m e n t C o . , L t d Decrease at this period Budget Balance in Increase at Name Switch to fixed Other Bala year-begin this period asset decrease cable-stayed bridge bealth monitoring system Other project 523,022.70 3,770,955.18 2,192,725.46 Total 420,770,409.92 984,037,665.91 321,761,860.86 0.00 1, 2. The capitalization amount of borrowing costs which were included in project cost. Amount of Increase at this fixed assets Other Balance in Project name Balance in year-begin period transferred decreases year-end to this period Fokai Extension 38,310,371.04 38,310,371.04 Project Yayao to Xiebian 1,786,050.00 1,786,050.00 Extension Project Jiujiang Bridge Repair 539,487.00 539,487.00 Project Fokai Expressway repair 1,738,865.25 1,738,865.25 Project 42,374,773.29 1,738,865.25 40,635,908.04 3. The Construction on process at period end increased RMB 662,275,805.05 than at period beginning, wi The main reasons of increasing is that : Expansion project of Guangfo and Fokai Expressway and the restoratio 120 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot （10）Intangible assets Balance in Increase at Decrease at Balance in Items year-begin this period this period year-end I.Total cost 290,987,603.00 155,668,000.00 135,319,603.00 Xiebian use right 93,809,400.00 93,809,400.00 Yayao use right 61,858,600.00 61,858,600.00 Jiujiang Bridge management 66,917,573.76 66,917,573.76 right Jiujiang Land Use right 68,402,029.24 68,402,029.24 II.Total of accumulative amortized 110,623,956.99 8,202,436.68 54,727,637.67 64,098,756.00 Xiebian use right 33,202,203.30 33,202,203.30 Yayao use right 20,445,081.69 1,080,352.68 21,525,434.37 Jiujiang Bridge management 28,175,808.00 3,521,976.00 31,697,784.00 right Jiujiang Land Use right 28,800,864.00 3,600,108.00 32,400,972.00 XII. Total of Provision for devaluation of intangible asset Xiebian use right Yayao use right Jiujiang Bridge management right Jiujiang Land Use right IV.Book value Total of 180,363,646.01 intangible assets 71,220,847.00 Xiebian use right 60,607,196.70 Yayao use right 41,413,518.31 Jiujiang Bridge management 38,741,765.76 35,219,789.76 right Jiujiang Land Use right 39,601,165.24 36,001,057.24 For detailed description of use right of Xiebian Interchange Bridge, see Note, "11, 3." For detailed description of use right of Yayao Interchange Bridge, see Note, "11, 2." （11）long term amortize expenses Increase Amortized Surplus Original Balance in Accumulative Balance in Items amount in this expenses Amortize year-begin amortized year-end period term Building 4.6 years 7,147,139.34 297,132.71 56,212.08 6,906,218.71 240,920.63 maintain Highway 0.6 years 9,299,304.27 1,170,110.91 739,017.60 8,868,210.96 431,093.31 Depreciation 121 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot Increase Amortized Surplus Original Balance in Accumulative Balance in Items amount in this expenses Amortize year-begin amortized year-end period term Other 4,340,330.19 2,042,889.28 745,955.40 3,043,396.31 1,296,933.88 1.6 years Total 20,786,773.80 3,510,132.90 1,541,185.08 18,817,825.98 1,968,947.82 long term amortize expenses at period end decrease RMB 1,541,185.08 than at period beginning, with an decrease ratio of 43.91%. （12）Deferred income tax assets and deferred income tax liability 1. Confirmed the deferred income tax assets Items Balance in year-end Balance in year-begin Impact from the cost of 1,002,353.86 amortization Loss of clearing 395,598.38 unapproved fixed assets Timing difference between 10,572,270.05 accounting and tax Total 10,967,868.43 1,002,353.86 The amount of temporary differences corresponding to asset projects which make temporary differences： Amount of temporary differences Loss of clearing unapproved 1,582,393.52 fixed assets Timing difference between 42,289,080.20 accounting and tax 43,871,473.72 2. Confirmed the deferred income tax liability Items Balance in year-end Balance in year-begin Impact from accumulated 101,054,676.23 85,043,508.88 depreciation Total 101,054,676.23 85,043,508.88 The amount of temporary differences corresponding to asset projects which make temporary differences： Amount of temporary differences Impact from accumulated 94,162,124.90 depreciation(Guangfo) Impact from accumulated 328,889,005.00 depreciation(Fokai) 423,051,129.90 Notes to deferred income tax liabilities: Guangfo Expressway and Fokai Expressway account accumulated depreciation according to traffic volume in accounting, and account accumulated depreciation by straight line method from tax law, if there is difference from time, the deferred income tax liabilities will produce. （13）Provision for depreciation of assets 122 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot Withdrawa Decreased amount in Book balance l amount current period Book balance at the year planned in Switch at the period Switch beginning current cancellat end back period ion I.Provision for bad debts 67,881,211.44 392,181.27 710,349.92 67,563,042.79 II.Provision for falling price of inventory III.Provision for devaluation of financial asset available for sales IV.Provision for devaluation of held-to maturity investment V.Provision for devaluation of long-term equity 36,793,200.00 36,793,200.00 investment VI.Provision for devaluation of investing property VII.Provision for devaluation of fixed assets VIII.Provision for devaluation of engineering materials IX.Provision for devaluation of construction in progress X.Provision for devaluation Of productive biological asset Including：Provision for devaluation of mature productive biological asset XI. Provision for devaluation of oil asset XII. Provision for devaluation of intangible asset XIII. Provision for devaluation of goodwill XIV.Other 104,674,411.44 392,181.27 710,349.92 104,356,242.79 （14）Short –tem loan 1. Short –tem loan Items Balance in year-end Balance in year-begin Credit loan 300,000,000.00 100,000,000.00 123 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot Impawn loan Mortgage loan Guarantee loan Total 300,000,000.00 100,000,000.00 2. Short –tem loan at period end Increase RMB 200,000,000.00 than at period beginning, with an increase ratio of 200%. The main reasons of increasing is that : added short-term borrowings. （15）Account payable Items Balance in year-end Balance in year-begin Within 1 year 89,095,271.49 6,428,789.67 1－2 years 2,549,253.43 625,000.00 2－3 years 1,728,128.90 4,128,128.90 Over 3 years 13,728,261.18 13,782,570.68 Total 107,100,915.00 24,964,489.25 1. There were no other receivable from the main shareholders of the Company holding nore than 5% (including 5%) of the total shares of the Company. 2. The balance of payable of the related party is RMB 92,448,139.51, accounting for 86.32 % of the total payable, details in the Notes 7(II)5 3. High balance account payable over 1 year has listed below Name Amount Not return Remark cause Account payable Guangdong Expressway Not 13,728,261.18 of Xiebian Co.,Ltd settlement Project Not Yuexi join Guangdong Xinyue 2,359,189.18 settlement Project account 4. Account Payable at the period end increased RMB 882,136,425.75 than at period beginning,, with an increase ratio of 329.01%, Increase reason: Increased the payable fund for Yayao-Xiebian Expansion project, the payable special project budget fund; the Fokai restoration project is transferred to fixed asset as accounts payable. （16）Advance account Items Balance in year-end Balance in year-begin Within 1 year 6,000,000.84 6,548,310.30 1－2 years 125,700.72 2－3 years Over 3 years Total 6,125,701.56 6,548,310.30 1. There were no other receivable from the main shareholders of the Company 124 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot holding nore than 5% (including 5%) of the total shares of the Company. 2. The balance of payable of the related party is RMB 95,948.52, accounting for 1.57 % of the total payable, details in the Notes 7(II)5 3. Advance account at the period end Decrease RMB 422,608.74, with an decrease ratio of 6.45%. （17）Payable Employee wage 1. Payable Employee wage Items Balance in Increase in Payable in this Balance in year-begin this period period year-end 1.wage,bonuds,subsidy 10,205,025.76 70,230,483.61 69,719,199.91 10,716,309.46 2.Employee welfare 658,939.89 2,940,778.58 2,940,778.58 658,939.89 3.Security insurance 41,814.02 10,488,031.71 10,486,433.91 43,411.82 Of which：1．Medical insurance 2,450,971.65 2,450,971.65 2．Basic old-age insurance 4,626,516.31 4,626,516.31 3．Annuity Payment 2,543,300.00 2,543,300.00 4.Unemployment insurance 560,718.18 560,718.18 5．Work injury insurance 14,695.52 204,353.97 204,353.97 14,695.52 6．Maternity insurance 27,118.50 102,171.60 102,171.60 27,118.50 4. Housing fund -5,505.26 7,667,398.00 7,536,632.00 125,260.74 5. Labour union outlay and 452,094.00 2,339,071.24 2,507,892.12 283,273.12 Employee Educatation outlay 6.. Non-Money Welfare 4,449,569.86 4,449,569.86 7.. Due to the lifting of 39,567.00 39,567.00 labor relations for compensation 8. Staff incentive fund 9.Other 1,889,118.00 1,889,118.00 Of which：paid Cash Total 11,352,368.41 100,044,018.00 99,569,191.38 11,827,195.03 2. Payable Employee wage at the period end increased RMB 474,826.62 than at period beginning,with an increase ratio of 4.18%. Increase reason: Increase in wages each company. （18）Payable tax Type Balance in Balance in Legal tax tate year-end year-begin VAT 144,718.87 198,173.04 17% Bunsiness tax 3,033,131.34 3,672,225.85 3%、5% City construction tax 102,011.83 -89,667.46 Turnover tax 7%,5% Education subjion 67,062.10 81,628.50 Enterprise income tax -315,878.82 33,942,404.69 25%,18% Property tax 1,256.07 1,256.07 Land use tax 297,840.00 750,914.56 Defend expense 96,101.76 120,537.58 Individual income tax 485,681.27 63,864.22 Stamp tax 67,873.57 Total 3,911,924.42 38,809,210.62 125 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot Payable tax at the period end Decrease RMB 34,897,286.20 than at period beginning,with an Decrease ratio of 89.92%. Main reasons were: in 2008, the new enterprise income tax law is implemented and income tax rates were reduced, and at the same time, the income was less than that of last year, so the corresponding payable taxes were reduced. （19）Interest payable Items Balance in year-end Balance in year-begin Pay the interest for long-term loans by 4,995,260.80 1,893,265.50 installments. Interet of company bonds Payable interest for 542,587.50 168,750.00 short-term borrowings Total 5,537,848.30 2,062,015.50 （20）Dividend payable The end of Names and categories of The Beginning of Reasons for not arrears of investors dividend arrears of dividend being paid Zhujiang Construction 38,121,887.43 Investment Co., Ltd. Dividends for Failed to contact shareholders of the shareholders A-share and B-share 12,316,103.37 17,924,691.75 of A-share and of Guangdong B-share Expressway Total 12,316,103.37 56,046,579.18 Dividend payable at the period end decrease RMB 43,730,475.8 than at period beginning,with an decrease ratio of 78.03%. Reasons for the change: the payable dividends of Guangfo Expressway Co., Ltd. at year beginning were paid to the external shareholder Zhujiang Construction Investment Co., Ltd. in the current period. （21）Other payable Items Balance in year-end Balance in year-begin Within 1 year 217,525,440.30 189,896,870.35 1－2 years 6,308,274.30 12,645,576.44 2－3 years 4,294,395.43 16,021,080.34 Over 3 years 35,289,501.88 19,978,747.93 Total 263,417,611.91 238,542,275.06 126 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot 1. There were no other receivable from the main shareholders of the Company holding nore than 5% (including 5%) of the total shares of the Company. 2. The balance of payable of the related party is RMB 164,355,229.70, accounting for 62.39 % of the total payable, details in the Notes 7(II)5 3. High balance Other payable over 1 year has listed below Name Amount Not Refund cause Remark Guangdong Guanghui 12,021,869.30 Current account Current Account ExpresswayCo., Ltd. no rertur Maozhan equity Guangdong Details in the transfer of communication 19,656,318.21 Notes principal and Investment Co., Ltd. 7(II)4,(2) interest Guangdong Guanyue 2,430,011.00 Project no Project settlement Guarantee account 34,108,198.51 4. Other payabnles with the greater amount Name Amount Content Remark Guangdong Guanghui 104,979,364.01 Current account Expressway Maozhan equity Guangdong transfer of Details in the communication 20,722,981.91 principal and Notes 7(II)4,(2) Investmen interest Guangdong Changda 13,761,217.17 Project account Quality guarantees Guangdong Guanyue 11,990,897.50 Project account Quality guarantees and Contract guarantees Shenzhen Sitong 10,300,000.00 Investment Details in the Compensation Development Co., Notes “11”5 Ltd. Zhujiang Construction 8,746,675.00 Current account Investment Co., Ltd. Total 170,501,135.59 5. Other payable at the period end Increase RMB 24,875,336.85 than at period beginning,with an Increase ratio of 10.43%. （22）Non-current liability due in 1 year Items Balance in year-end Balance in year-begin Long-term loan 290,000,000.00 470,000,000.00 127 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot Items Balance in year-end Balance in year-begin Bond payable Long-term payable Total 290,000,000.00 470,000,000.00 1. Long-loan due in 1 year Items Balance in year-end Balance in year-begin Credit loan 290,000,000.00 470,000,000.00 Impawn loan Mortgage loan Guarantee loan Total 290,000,000.00 470,000,000.00 The Termina Balance in Balance in beginni tion year-end year-begin Name ng of Date Date China Everbright 2006-4-11 2009-4-11 100,000,000.00 100,000,000.00 Bank ,Wuyang Branch Shenzhen Development 370,000,000.00 Bank Constrution Bank ,Guangzhou Liwan 2008-12-3 2009-12-2 40,000,000.00 Branch Industrial and commercial Bank..Guangzhou Second 2008-10-30 2009-10-21 150,000,000.00 Branch Total 290,000,000.00 470,000,000.00 （23）Long –term loan Items Balance in year-end Balance in year-begin Credit loan 2,348,324,803.54 530,000,000.00 Impawn loan Mortgage loan Guarantee loan Shareholder loans 458,324,803.54 Total 2,348,324,803.54 988,324,803.54 The Termina Balance in Balance in beginni tion year-end year-begin Name ng of Date Date Guangdong Expressway 458,324,803.54 Industry Bank. Guangzhou 2003-11-28 2011-11-28 100,000,000.00 100,000,000.00 Tianhebei Branch China merchants 2005-6-30 2010-6-30 50,000,000.00 50,000,000.00 Bank.Guangzhou Branch 128 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot The Termina Balance in Balance in beginni tion year-end year-begin Name ng of Date Date China merchants 2006-5-11 2011-5-11 50,000,000.00 50,000,000.00 Bank.Guangzhou Branch China merchants 2008-4-24 2010-4-24 100,000,000.00 Bank.Guangzhou Branch China merchants 2008-6-10 2023-6-10 200,000,000.00 Bank.Guangzhou Branch China merchants 2008-4-23 2023-4-23 200,000,000.00 Bank.Guangzhou Branch China merchants 2008 年 2023 300,000,000.00 Bank.Guangzhou Branch Shenzhen Development 2008-6-11 2013-6-10 100,000,000.00 Bank China Bank ,Guangzhou 2003-12-29 2013-9-28 578,324,803.54 80,000,000.00 Liwan Branch Industrial and commercial Bank..Guangzhou Second 2005-7-28 2012-10-31 150,000,000.00 150,000,000.00 Branch Communications Bank ,Foping 2008 年 2015 300,000,000.00 Branch SPD Jiefang Road Branch 2008 年 2011 70,000,000.00 China merchants Bank. 2008-1-10 2011-1-9 60,000,000.00 Guangzhou Baiyun Branch Industrial and commercial Bank..Guangzhou Fangchun 2008-6-27 2011-6-16 50,000,000.00 Branch China merchants Bank. 2008-6-19 2011-1-9 40,000,000.00 Guangzhou Baiyun Branch China Everbright 2006-4-11 2009-4-11 100,000,000.00 Bank ,Wuyang Branch Total 2,348,324,803.54 988,324,803.54 Long-term loan at the period end Increase RMB than at period beginning,with an Increase ratio of 137.61%. Increase reason: Borrowings increased due to expanded construction of the controlling subsidiary. （24）Capital share Shares Amount Shares Amount A shares （Face value of each 908,367,748 908,367,748.00 908,367,748 908,367,748.00 share was 1 RMB ） B shares （Face value of each 348,750,000 348,750,000.00 348,750,000 348,750,000.00 share was 1 RMB ） 1,257,117,748 1,257,117,748.00 1,257,117,748 1,257,117,748.00 Changes in Capital shares Balance in Items Changed（+，-） Balance in year-end year-begin 129 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot Share Bon Capit allot us alizati Prop ment shar on of Propo ortio es com Amount Other Subtotal Amount rtion n mon reserv ％ ％ e fund 1.Shares with conditional subscription 1.State-owned shares 408,229,394 32.47 14,208（Note） 14,208 408,243,602 32.47 2.State –owned legal 23,468,541 1.87 23,468,541 1.87 person shares 3.Other domestic shares 58,222,871 4.63 -41,129,146（Note） -41,129,146 17,093,725 1.36 Including： Domestic non-state ovened legal person 58,006,668 4.61 -45,076,592（Note） -45,076,592 12,930,076 1.03 shares Domestic natural person 216,203 0.02 3,947,446（Note） 3,947,446 4,163,649 0.33 shares (4). Foreign shares Including： Foreign legal person shares Domestic natural person shares Total Shares with 489,920,806 38.97 -41,114,938 -41,114,938 448,805,868 35.70 conditional subscription 2.Shares with uncounditional subscription (1). Common shares in 418,446,942 33.29 41,114,938 41,114,938 459,561,880 36.56 RMB (2).foreign shares in 348,750,000 27.74 348,750,000 27.74 domestic market (3).Foreign shares in overseas market (4)other Total Shares with uncounditional 767,196,942 61.03 41,114,938 41,114,938 808,311,880 64.30 subscription 3．.Total of capital shares 1,257,117,748 100 1,257,117,748 100 Note： In this reporting period, Foshan Car Repair Factory repaid 14,208 shares as corresponding shares to Guangdong Communications Group, which were transferred from "domestic non-state-owned legal person shares" to "state-owned shares", were still the shares with limited sale conditions. (2)6802 shareholders holding 41,101,350 "domestic non-state-owned legal person shares" with limited sale conditions in the current reporting period were listed for circulation on January 7, 2008 by canceling sale conditions. (3) In this reporting period, 3,961,034 shares held by 836 natural persons were still shares with sale limit, transferred from "domestic non-state-owned legal person shares" to "domestic natural person shares". (4) In this report period, there are 6802 shareholders with a total of 41,101,350 shares of limit-sale "non-state-owned legal person shares", on January 7, 2008, the sale limit was canceled started circulation in market. (5) Six month after the former chairman of the company Mr. Cao Xiaofeng’s leaving from his position, 18,078 shares held by him "shares held by natural person" was unfrozen. 130 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot A total of 41,119,428 shares in ③ ④ together were transferred from shares with sale conditions to shares without sale conditions. (6) 4490 shares held by Mr. Chen Chuxuan, Chairman of the new Supervisory Board of the Company were transferred from shares without sale conditions to “domestic natural-person-held shares”, transferring from shares with sale conditions to shares without sale conditions. （25）Capital reserves Increase Decrease Balance in Items in this in this Balance in year-end year-begin period period Share capital premium 1,534,759,970.60 1,534,759,970.60 Other capital reserves 146,885.72 146,885.72 Total 1,534,906,856.32 1,534,906,856.32 （XXVI）Surplus reserves Decrease Balance in Balance in Items Increase in in this year-begin year-end this period period Statutory Surplus reserves 43,852,074.48 48,069,427.25 91,921,501.73 Statutory commonweal fund Repertory fund Enterprise Development fund Other Surplus reserves Other 43,852,074.48 48,069,427.25 91,921,501.73 In accordance with Company Charter, the company drew the statutory surplus fund according to 10% of net profit of the parent company. （27）Retained profit Items Same period of the Report period previous year Balance at the end of last year 488,675,530.65 654,130,597.68 Add：Change of accounting policy -401,554,957.83 Correcting previous errors Balance at the beginning of current yea 488,675,530.65 252,575,639.85 Add: Net profit attributable to the owners of 398,260,910.28 493,661,982.44 parent company Other switch into Less ： Withdrawing statutory surplus public 48,069,427.25 43,852,074.48 reserve Withdrawing Employee incentive and welfare fund Withdrawing Repertory fund Withdrawing Repertory fund Withdrawing Enterprise Development fund Preferred stock dividend payable 131 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot Items Same period of the Report period previous year Withdrawing Surplus reserves Common stock dividend payable 301,708,259.52 213,710,017.16 Transferring into capital Balance at the end of this term 537,158,754.16 488,675,530.65 （28）Operating income and operating cost Items Report period Same period of the previous year Income Cost Income Cost Main operation 927,383,741.37 378,807,278.76 1,103,023,432.90 331,052,467.26 Other operation 9,894,566.05 4,097,758.49 10,161,422.36 6,586,698.09 937,278,307.42 382,905,037.25 1,113,184,855.26 337,639,165.35 1. The particular figures about item Main operating income and Main operating cost has listed as follows Report period Same period of the previous year Items Income for main Cost for main Income for main Cost for main operation operation operation operation （1）Industry （2）Business （3）Real estate （4）Tourism catering services （ 5 ） Highway 922,349,166.23 376,016,530.72 1,093,153,839.00 321,914,353.82 Transportation （6）Other 5,034,575.14 2,790,748.04 9,869,593.90 9,138,113.44 927,383,741.37 378,807,278.76 1,103,023,432.90 331,052,467.26 2. The particular figures about Product Main operating income and Main operating cost has listed as follows Report period Same period of the previous year Items Income for main Cost for main Income for main Cost for main operation operation operation operation (1)Toll 922,349,166.23 376,016,530.72 1,093,153,839.00 321,914,353.82 (2)Other 5,034,575.14 2,790,748.04 9,869,593.90 9,138,113.44 Total 927,383,741.37 378,807,278.76 1,103,023,432.90 331,052,467.26 3. The particular figures about Area Main operating income and Main operating cost has listed as follows Report period Same period of the previous year Area Income for main Cost for main Income for main Cost for main operation operation operation operation Guangfo Expressway 300,563,216.44 116,209,558.46 375,485,580.41 104,063,207.00 Fokai Expressway 621,785,949.79 247,241,835.78 696,272,685.59 201,740,621.71 Jiujiang Bridge 12,565,136.48 21,395,573.00 16,110,525.11 Other 5,034,575.14 2,790,748.04 9,869,593.90 9,138,113.44 Total 927,383,741.37 378,807,278.76 1,103,023,432.90 331,052,467.26 132 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot 4. The amount from current period to last year same period of operation income is Decrease, the decrease number is RMB175,906,547.84, the decrease proportion is 15.80%, Reasons for the decrease: due to snowstorm in the current period and opening green passageway, vehicles shipping agricultural products were free of charge. In addition, Guangfo Epxressway was under expension construction, Fokai Expressway was under overhaul and repair, vehicle flow was affected, so the traffic charge income in the current period decreased than in the previous period. （29）Business tax and subjoin Items Statutory tax Same period of the rate Report period previous year Business tax 3%、5% 28,463,542.10 34,199,938.30 Urban 7% 1,561,989.63 1,572,146.29 construction tax Education 3% 575,118.11 675,611.91 surcharge Other 62,105.56 34,618.43 Total 30,662,755.40 36,482,314.93 The amount from current period to last year same period of sales tax and addition is Decrease, the decrease number is RMB5,819,559.53, the decrease proportion is 15.95%, the main reason is that decrease income from toll fee caused the decrease money of the corresponding taxes. （30）Management expenses Same period of the Items Report period previous year Total Management expenses 100,939,447.79 96,101,830.07 Management expenses rate 10.77% 8.63% The amount from current period to last year same period of Management expenses is increases, the Increases number is RMB4,837,617.72, the increase proportion is 5.03%. （31）Financial Expenses Same period of the Items Report period previous year Interest expense 120,858,944.17 107,721,966.75 Less:Interest income 3,325,361.57 5,838,904.22 Exchange Income and loss 31,868.42 -524,078.09 Other 688,862.13 461,230.46 Total 118,254,313.15 101,820,214.90 The amount from current period to last year same period of financial cost is increases, the Increases number is RMB16,434,098.25, the increase proportion is 16.14%. Reasons for the increase: Bank borrowings in the current period increased, and the corresponding interet payments increased. 133 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot （32）Loss for depreciation of assets Same period of the Items Report period previous year 1．Loss for bad debts -318,168.65 8,151,769.88 2．Loss for falling price of inventory 3．Loss for devaluation of financial asset available for sales 4．Loss for devaluation of held-to maturity investment 5．Loss for devaluation of long-term equity investment 6．Loss for devaluation of investing property 7．loss for devaluation of fixed assets 8．loss for devaluation of engineering materials 9．loss for devaluation of construction in progress 10．loss for devaluation Of productive biological asset 11．loss for devaluation of oil asset 12．loss for devaluation of intangible asset 13．loss for devaluation of goodwill 14．other Total -318,168.65 8,151,769.88 （33）Investment income Same period of the Items Report period previous year 1. Iinvestment income from financial asset (1). Investment income obtained during holding transactional financial assets (2). Investment income obtained during holding due investments. (3). Investment income obtained during holding financial assets for sale (4). Investment income obtained by disposing transactional financial assets 134 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot Same period of the Items Report period previous year (5).Investment income obtained by disposing due investment held (6). Investment income obtained by disposing financial investment for sale 2. Investment income from 254,733,099.28 260,239,784.93 long-term equity (1). Long-term equity investment income conformed according to cost method (2). Long-term equity investment income conformed 254,733,099.28 260,239,784.93 according to equity method (a total of 10) (3). Investment income from producing Long-term equity investment 3．Other Total 254,733,099.28 260,239,784.93 Of which： (1). long-term equity investment incomes confirmed by equity method include: Reasons for the changes between current Same period of period and Report period the previous year last period Guangdong Maozhan Expressway Co., Ltd. 2,093,857.86 -828,222.31 Guangdong Guanghui Expressway 115,097,236.91 106,021,293.42 Zhaoqing Yuezhao Highway 3,831,073.35 18,129,063.88 Guangzhou Xinlu -327,445.82 131,704.76 Beijing Gelin Enze -2,062,656.98 Shenzhen Huiyan Expressway 60,921,515.27 56,150,118.21 Jingzhu Expressway Guangzhu 100,575,278.44 86,674,552.65 Guangdong Jiangzhong Expressway -3,682,401.74 -3,976,068.70 Ganzhou Kangda Expressway -23,776,014.99 Ganzhou Gankang Expressway Total 254,733,099.28 260,239,784.93 1. There were no significant limits on investment income of the Company. 2. Investment income happened in the current period reduced RMB 5,506,685.65 over the previous period, with decrease ratio 2.12%, the reasons for the decrease: the net profit of every expressway had growth in the current year, the corresponding investment income also increased, but Ganzhou Kangda Expressway opened in this period, so big loss happened at initial period. 135 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot （34）Non-operation income Same period of the Items Report period previous year 1. Total profits of 549,589.64 non-current assets disposal Including：Fixed asset disposal 549,589.64 profits Intangible asset disposal profits 2. Non-monetary assets exchange profit 3. Debt restructuring profits 4．Donation income 5．Government Subsidy 6．Check income 14,962.60 7．Road permits claims income 3,473,945.40 2,349,976.33 8．Sell Ticket surplus 47,073.00 3,409.00 9．IC card Cost fee 30,000.00 38,275.00 10．House income 11,290.00 5,276.90 11．Fine income 3,000.00 50.00 12．Insurance claims 199,389.00 income 13．Other 484,113.40 423,607.87 Total 4,248,810.80 3,385,147.34 Non-business income happened in the current period increased RMB 863,663.46 over the previous period, with increase ratio 25.51%, the reasons for the increase: the road compensation income increased. （35）Non-Operation expense Same period of the Items Report period previous year 1.Total of non-current asset 31,781,537.83 51,411,075.83 Disposition loss Incl: loss of fixed assets disposition 31,781,537.83 51,411,075.83 Loss of Intangible assets disposition 2 ． Loss of Non-monetary assetsexchange 3．Debt restructuring loss 4.External donor 130,000.00 expenditure Incl ： Donations for public 130,000.00 welfare spending 5．Special loss 6．Check loss 7 ． Fines and late fees 110.45 2,724,419.64 expenses 136 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot Same period of the Items Report period previous year 8 ． Road property damage 2,862,835.78 1,026,569.01 repair expenses 9 ． Risk of payment 3,743.00 6,352.50 charges 10．Other 1,130,115.37 92,599.97 Total 35,908,342.43 55,261,016.95 Non-business expense happened in the current period decrease RMB 19,352,674.52 over the previous period, with decrease ratio 35.02%, the reasons for the decrease: costs for clearing up Jiujiang Bridge reduced. （36）Income tax expenses Same period of the Items Report period previous year Income tax in current term 58,993,918.76 157,292,552.67 Deferred income tax 6,045,652.78 -6,435,760.95 Total 65,039,571.54 150,856,791.72 （37）Note Cash flow statement 1. Receive other cash Items Report period 1.Interest income 3,325,361.57 2.receive current account 95,616,450.30 3.Deposit 106,039,133.49 4. A shares back taxes 7,506,241.92 5.receive imprest 5,120,329.55 6. Non-Operation income 4,215,860.30 7.Deposit 2,070,899.88 8.Shenzhen Shitong Company to recover 10,300,000.00 compensation 9.Other 6,225,539.47 Total 240,419,816.48 2. Paid other Items Report period 1.Management Expenses 41,867,831.87 2. Payable exchanges 98,598,781.78 3.Payment of imprest 6,623,255.00 4. Non-operating expenses 3,590,527.42 5. Deposit 29,790,166.67 6. Deposit 1,870,320.00 7.Pay dividends to thareholders of the personal 7,506,241.92 income tax 8.Other 3,408,075.44 Total 193,255,200.10 3. Supplement Information of Cash flow statement 137 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot Same period of the Items Report period previous year I.Adjusting net profit to net cash flow in operating activities Net profit 462,868,918.59 590,496,683.73 Add: Asset devaluation reserve provided -318,168.65 8,151,769.88 Fixed assets depreciation,Oil and gas depreciation, Produce matter depreciation 146,541,127.85 160,998,167.90 Amortization of intangible assets 8,202,436.68 17,767,723.92 Amortization of long-term expenses to be amortized 1,541,185.08 2,067,872.33 The loss from the disposal of fixed assets, intangible assets and other long-term assets 20,758,418.43 51,164,872.06 Loss from scrapping of fixed assets 11,023,119.40 -303,385.87 Loss from fair change Financial expenses 120,890,812.59 107,721,966.75 Investment loss -254,733,099.28 -260,239,784.93 decrease of deferred tax assets -9,965,514.57 6,051,790.24 Increase of deferred tax Liabilities 16,011,167.35 -12,487,551.19 Decrease of inventories -265,004.99 -20,862.70 Decrease of operating accounts receivable -73,351,776.31 223,923,236.98 Increase of operating accounts payable 140,594,497.07 -204,467,295.41 Other Net cash flow generated from operating activities 589,798,119.24 690,825,203.69 II.Investment and financing activities not involving cash receipts and expenditure Transferring debts to capital Convertible corporate bond to mature within one year Leasing fixed assets through financing III、Net increase of cash and cash equivalent Balance of cash at the end of the period 350,765,725.76 190,665,302.76 Less: Balance of cash at the beginning of the period 190,665,302.76 490,764,819.04 Add: Balance of cash equivalent at the end of the period Less: Balance of cash equivalent at the beginning of the period Net increase of cash and cash equivalent 160,100,423.00 -300,099,516.28 4.Relevant information of subsidiaries and other business units obtained or disposed in current period Balance in Items Balance in year-end year-begin I. Relevant information on obtaining subsidiaries and other business units 1．Price on obtaining subsidiaries and other business units 2．Cash and cash equivalents paid for obtaining subsidiaries and other business units Less ：Cash and cash equivalents held by subsidiaries and other business units 3．Net cash paid by obtaining subsidiaries and other business units 138 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot Balance in Items Balance in year-end year-begin 4．Net assets from obtaining subsidiaries Current assets Non- Current assets Current Liabilities Non- Current Liabilities II. Relevant information on disposing subsidiaries and other business units 1．Price on disposing subsidiaries and other business units 2．Cash and cash equivalents received by disposing subsidiaries and other business units Less ：Cash and cash equivalents held by subsidiaries and other business units 3．Net cash received by disposing subsidiaries and other business units 4．Net assets by disposing subsidiaries Current assets Non- Current assets Current Liabilities 5. Composition of cash and cash equivalents: Balance in Items Balance in year-end year-begin I. Cash 350,765,725.76 190,665,302.76 Incl：Stock cash 73,021.90 91,691.97 Bank deposits which can be used at any time 349,771,669.79 189,709,527.76 Other monetary funds which can be used at any time 388,843.09 864,083.03 Money kept in central bank which can be used Money deposited in same industry Money separated in same industry II. cash equivalent Incl ：Bond investment due in three months III. Balance of cash equivalent at the end of the period 350,765,725.76 190,665,302.76 Incl：Parent company and subsidiaries in the group used the limited ash and cash equivalents VI. Notes to main items of financial statements of the parent company 1. Other receivables (1). Other receivables at different levels are as follows: （a）Age analyse Balance in year-end Balance in year-begin Proport Proport Age ion of ion of Proporti Bad debt Proporti Bad debt Book Balance Bad Book Balance Bad on reserve on reserve debt debt reserve reserve Within 1 years 5,509,446.14 8.27% 33,740,902.88 48.84% 1－2 years 26,240,025.00 39.40% 139 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot 2－3 years 3－4 years 4－5 years 33,872,346.59 49.03% 33,872,346.59 95.84% Over 5 years 34,856,953.92 52.33% 34,856,953.92 100% 1,470,000.00 2.13% 1,470,000.00 4.16% Total 66,606,425.06 100% 34,856,953.92 100% 69,083,249.47 100% 35,342,346.59 100% （2）Items analyse Proport ion of Proport Bad debt Proport Bad debt 坏账准 Type Book Balance Bad Book Balance ion reserve ion reserve 备比例 debt reserve 1.Significant account receivable 33,198,382.12 49.84% 33,198,382.12 95.24% 33,683,774.79 48.76% 33,683,774.79 95.31% of single amount 2.The receivables that the individual amount is not large but the risk is great ３．Other risks 33,408,042.94 50.16% 1,658,571.80 4.76% 35,399,474.68 51.24% 1,658,571.80 4.69% of credit features： Incl ： Singleaccount with lare amount Single minor 33,408,042.94 50.16% 1,658,571.80 4.76% 35,399,474.68 51.24% 1,658,571.80 4.69% accounts Incl ： Single account without large amount but with greater risks after combined with credit features Total 66,606,425.06 100% 34,856,953.92 100% 69,083,249.47 100% 35,342,346.59 100% 2. The changes of other accounts receivable for bad debts are as follows: Amount reduced in Amount current period Book balance at accounted in Book balance Periods Rese year begining current Transferr at period end llin period ed back g 2007 (last 35,248,060.69 94,285.90 35,342,346.59 period) 2008 (current 35,342,346.59 485,392.67 34,856,953.92 140 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot period) 3. The other receivables with significant single amount at period end or not significant but accounting provision for impairment separately: Ratio Amount for Other receivables Book balance accounte preparation Reasons d for bad debt The company had entered Kunlun Securities Co., Ltd. 33,198,382.12 100% 33,198,382.12 the stage of bankruptcy liquidation 4. Other receivables with provision for bad debts accounted in prior years in large proportion and recovered in full or in part in current period Reasonabi lity of Amount of Reasons for original recovery or original Recovery estimated Debtor's name reorganizat estimated method accountin ion of accounting g credit proportion proportio n Transferred Details back by described in Reasonabl Kunlun Securities Co., Ltd. 485,392.67 liquidation “Five (5)3, e team Note 1” 5. There were no other receivable from the main shareholders of the Company holding nore than 5% (including 5%) of the total shares of the Company. 6. The balance of payable of the related party is RMB 26,240,025.00, accounting for 39.40 % of the total payable. Unit Name Relation with Debt amount Ratio to the total amount the Company of other receivables Guangfo Expressway Co., Ltd. Subsidiary 26,240,025.00 39.40% 7. Accounts receivable at the end of the top five in the amount Relationship Debtor with the Property Amount Age Proportion Company Kunlun Securities No Over 5 Deposit 33,198,382.12 49.84% Co., Ltd. relationship years Guangfo Expressway Within 1 Subsidiary Current account 26,240,025.00 39.40% Co., Ltd. year Heshan communications No Over 5 Real estate Current account 1,470,000.00 2.21% Development relationship years Company 141 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot Pay the related fee that should be paid No Within 1 by relevent Pay on advence 1,761,154.01 2.64% relationship year shareholders on advancement No Within 1 Guangdong finance Advence payment 1,453,690.00 2.18% relationship year 8. Other receivable at the period end decrease RMB 1,991,431.74 than at period beginning,with an decrease ratio of 5.90%. （II）Long-term share equity investment Balance in year-end Balance in year-begin Items Impairment Impairment Book balance provision Book balance provision Long-term equity investment to subsidiary 1,062,203,569.52 1,062,203,569.52 Equity method: Long-term equity investment Partnership 959,559,648.68 1,047,228,331.17 Affiliated company 1,235,403,805.11 803,630,502.66 2,194,963,453.79 1,850,858,833.83 Cost method: Long-term equi investment 7,020,000.00 6,793,200.00 7,020,000.00 6,793,200.00 3,264,187,023.31 6,793,200.00 2,920,082,403.35 6,793,200.00 1. Investment to subsidiary. Increase Decrease Initial Balance in in this in this Balance in Name of Subsidiary investment year-begin period period year-end Guangfo Expressway Co., Ltd. 154,982,475.25 154,982,475.25 154,982,475.25 Guangdong Fokai Expressway 812,409,211.85 812,409,211.85 812,409,211.85 Guangdong Expressway Technology Investment Co., Ltd. 94,811,882.42 94,811,882.42 94,811,882.42 1,062,203,569.52 1,062,203,569.52 1,062,203,569.52 142 G u a n g d o n g P r o v i n c i a l E x p r e s s w a y D e v e l o p m e n t C o . , L t d 2. .Investment was the main units of infornation Held Legal Registrated Name Type Registrated place Property share Representative capital proportion I. Partnership 1.Guangdong Limited liability Guanghui Company Guangzhou, Expressway Liu Gangliang 2,351,678,000.00 30% Expressway Guangdong Management Co., Ltd. Limited liability 2. Zhaoqing Company(Taiwan, Yuezhao Expressway Hong Kong and Zhaoqing, Guangdong Wang Jiachen 818,300,000.00 25% Highway Management Macao and in Co., Ltd. cooperation） II. Affiliated company 1.Shenzhen Limited liability Huiyan Company Expressway Shenzhen ,Guangdong Xu Xiaoyang 36,000,000.00 33.33% Expressway Management Co., Ltd. 2.Guangdong Limited liability Maozhan Company Guangzhou, Expressway Li Jinfeng 1,120,000,000.00 20% Expressway Guangdong Management Co., Ltd. Limited liability 3. Jingzhu Company(Taiwan, Guangzhou, Expressway Expressway Hong Kong and Lu Yaxing 580,000,000.00 20% Guangdong Management Guanzhu Macao and in cooperation） 4.Guangdong Limited liability Jiangzhong Company Guangzhou, Expressway Lu Yaxing 1,015,000,000.00 15% Expressway Guangdong Management Co., Ltd. 143 G u a n g d o n g P r o v i n c i a l E x p r e s s w a y D e v e l o p m e n t C o . , L t d Held Legal Registrated Name Type Registrated place Property share Representative capital proportion 5.Ganzhou Limited liability Expressway Kangda Company Ganzhou, Jiangxi Yao Diming 600,000,000.00 30% Management Expressway 6.Ganzhou Limited liability Gankang Company Expressway Ganzhou, Jiangxi Liu Zequan 100,000,000.00 30% Expressway Management Co., Ltd. 144 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot The Relat current ed Organiz Total Total Assets in Net profit in party ation Name Liabilities period year-end current period relati Code In year-end total onshi revenues p I. Partnership 1.Guangdong Partn Guanghui 707685 6,654,896,901.62 4,227,471,825.60 1,258,117,577.00 383,657,456.37 ershi Expressway Co., 410 Ltd p 2. .Zhaoqing Partn 708157 Yuezhao Highway 2,416,785,864.63 1,557,973,622.29 288,024,927.97 18,226,821.24 ership 00-3 Co., Ltd. II. Affiliated company Affil 1.Shenzhen Huiyan iated 192203 Expressway Co., 603,726,769.95 32,939,450.09 306,027,397.16 187,029,583.20 Ltd. compa 792 ny Affili 2.Guangdong ated 707668 Maozhan 2,852,821,608.81 2,240,552,355.78 336,300,101.50 10,469,289.30 comp 63-7 Expressway any Affili 3.Jingzhu ated 617401 Expressway 4,362,066,257.57 2,826,909,954.50 1,065,302,983.53 541,538,820.82 comp 445 Guangzhu any Affili 4.Guangdong ated 742962 Jiangzhong 2,795,270,504.80 1,900,512,199.17 251,226,509.74 -24,549,344.93 comp 35-6 Expressway any Affili 5.Ganzhou ated 772390 1,922,655,922.76 1,445,672,760.29 11,572,868.00 -75,751,245.95 Kangdong comp 39-5 Expressway any Affili ated comp any 799467 886,183,441.51 536,183,441.51 Affili 19-6 ated 6.Ganzhou Gankang comp Expressway any 3. . .Long-term share equity investment measured based on Equity method Equity ncrease / decrease in current period Cost for Amount at year Amount at Units being invested Of which: cash initial fund beginning period end Total dividend returned I. Partnership 1.Guangdong Guanghui Expressway Co., Ltd 678,000,000.00 699,367,285.91 28,860,236.91 86,237,000.00 728,227,522.82 145 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot 2. .Zhaoqing Yuezhao Highway Co., Ltd. 183,690,616.22 227,501,052.51 3,831,073.35 231,332,125.86 II. Affiliated company 1.Shenzhen Huiyan Expressway Co., Ltd. 14,024,586.42 207,704,279.65 921,515.27 60,000,000.00 208,625,794.92 2.Guangdong Maozhan Expressway 224,000,000.00 120,359,992.75 2,093,857.86 122,453,850.61 3.Jingzhu Expressway Guangzhu 66,779,449.38 458,030,075.41 14,605,253.30 85,970,025.14 472,635,328.71 4.Guangdong Jiangzhong Expressway 104,650,000.00 137,896,147.60 -3,682,401.74 134,213,745.86 5.Ganzhou Kangdong Expressway 216,251,100.00 192,475,085.01 192,475,085.01 6.Ganzhou Gankang Expressway 105,000,000.00 105,000,000.00 105,000,000.00 Total 1,592,395,752.02 1,850,858,833.83 344,104,619.96 232,207,025.14 2,194,963,453.79 Note：due to the variation of shareholders of Guangdong Maozhan Expressway Co,. Ltd, After variation shareholders have taken 80% of share and our company takes 20%. Hence we have been changed from partnershop enterprice to affilianted company this year. 4.Long-term share equity investment measured based on cost method Equity ncrease / decrease in current period Cost for Amount at year Amount at Units being invested Of which: initial fund beginning period end cash Total dividend returned Huaxia Securities Co., Ltd 5,400,000.00 5,400,000.00 5,400,000.00 Huazheng Asset Management 1,620,000.00 1,620,000.00 1,620,000.00 Co., Ltd. Total 7,020,000.00 7,020,000.00 7,020,000.00 5. Impairment provisionof of long-term equity investment Amount at year Increase in Decrease in Amount at Units being invested causse beginning this period this period period end Huazheng Asset Management 1,393,200.00 1,393,200.00 5（7）4 Note 1 Co., Ltd. Huaxia Securities Co., Ltd 5,400,000.00 5,400,000.00 5（7）4 Note 2 合 计 6,793,200.00 6,793,200.00 6. Long-term equity investment at the period end increase RMB 344,104,619.96 than at period beginning,with an Increase ratio of 11.81%. Increase reason： In the current period, added new investment RMB 216,251,100.00 to Ganzhou Kangda Expressway Company Limited and RMB 105,000,000.00 to Ganzhou Gankang Expressway Company; the net profit of the unit being invested increased, and investment income increased, and accordingly, the investment balance of long-term investment increased. （III）Business income and Business cost 146 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot Items Current term Same term previou years Income Cost Income Cost Main Business Other Business 507,486.40 286,914.80 507,486.40 286,914.80 The amount from current period to last year same period of Business income income is Increase, the increase number is RMB220,571.60, the increase proportion is 76.88%. （IV）Investment income Current term Same term previou Items years I.Investment income from financial assets (1)Investment income obtained by holding transactional financial assets （2） Investment income obtained by holding due investment （3） Investment income obtained holding financial assets for sale （4） Investment income obtained by disposing transactional financial assets （5） Investment income obtained by disposing transactional financial assets （6） Investment income obtained by disposing financial assets for sale 2．Income from long-term equity 530,781,048.67 530,530,579.23 investment （ 1 ） Income from long-term 275,720,503.57 268,359,842.08 equity investment confirmed by cost calculation (2 in total) （ 2 ） Income from long-term 255,060,545.10 262,170,737.15 equity investment confirmed by equity calculation（in 8 total） （ 3 ） Investment income from disposing long-term equity investment 3．Other Total 530,781,048.67 530,530,579.23 Of which： （1）Incomes from long-term equity investment confirmed by cost method: Current term Same term previou years Guangfo Expressway 136,816,722.49 160,176,278.52 Guangdong Fokai Expressway 138,903,781.08 108,183,563.56 147 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot Total 275,720,503.57 268,359,842.08 （2）Incomes from long-term equity investment confirmed by Equity method: Current term Same term previou years Guangdong Maozhan Expressway 2,093,857.86 -828,222.31 Guangdong Guanghui Expressway 115,097,236.91 106,021,293.42 .Zhaoqing Yuezhao Highway Co., Ltd. 3,831,073.35 18,129,063.88 Shenzhen Huiyan Expressway 60,921,515.27 56,150,118.21 Jingzhu Expressway Guangzhu 100,575,278.44 86,674,552.65 Guangdong Jiangzhong Expressway -3,682,401.74 -3,976,068.70 Ganzhou Kangda Expressway -23,776,014.99 Ganzhou Gankang Expressway Total 255,060,545.10 262,170,737.15 1. No major restrictions on repatriation of investment income of the Company. 2. Investment income happened in current period reduced RMB 7,110,192.05 over the previous period, with reduction ratio 2.71%, reasons for the reduction as follows: the net profit realized in current year by units being invested increased and the corresponding investment income increased, but Ganzhou Kangda Expressway opened the current period, so the loss in the earlier period was large. VII. Relationships and Transactions of Related Parties. (I) Standards for identifying the related parties. 1. The related parties that have relations of controlling. １.Pearent Company （Unit:RMB’0000） The The With parent The ultim the compan parent ate y of the contr Organiz Enter Corp Register Legal Registrat company prise Type ed represent The main business. ed Compa of the olling ation orate name address ative capital ny's Compan party Code Relati shareho y’s vote of the ons ratio lding Com ratio pany Equity Management: Organize the reorganization of assets, optimize the allocations, Raise funds through the ways of mortgage, transfer of property rights, transformation of joint-stock; Project Guang Guangdo investment, operation and dong ng Pearen State No. 27, Bai comm management; Infrastructure communi t owned Zhu unicati 7238385 cation Comp Co., Guangzh Xiaoling construction of transportation; 1,980,000 40.60% 40.60% on 52 Group any Ltd. ou. Projects of road and rail and Group Co., Ltd the related industries; Co., Technology development, Ltd application and consulting services; Transportation of passengers and freights by road and rail; Shipping industry; Related businesses abroad. 2.Subsidiary 148 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot （Uit：RMB’0000） Orga Type Sharehol Registered Legal Registrat nizati of Type of ding Vote Name represent The main business ed on Subsid Enterprise address ratio ratio ative capital Code iary Limited liability Company (Taiwan, Shabei Construction, tolling and Guangfo Subsi Hong Zhou 61740 Expressway Kong and West,Gu Yuming maintenance of Guangfo 20,000 75% 75% 143-7 diary angzhou Expressway Macao and in cooperati on） Operation and management of Fokai No.83, Expressway and Baiyun supporting salvage, Guangdong Limited Subsi Road, Li repair, cleaning, car 23112 Fokai liability Yuexiu Xiyuan 110,800 75% 75% 4318 Expressway diary spare parts supply Company District ,Gu services and Jiujiang angzhou Bridge of Guangzhan maintenance and management Investment in technical industries and provision of relevant consulting services, research and development of lighting 4/F,Guangd technology, energy saving ong and storage technology, Guangdong Expresswa photovoltaic technology of Expressway Limited y Building, solar energy and Subsi No.85, 73145 Technology liability Baiyun Zhang Yi production and sales of 10,000 95% 95% 698-4 diary Investment Company Road, relevant products, design, Co., Ltd. Yuexiu production , release and District, agency of all kinds of Guangzhou domestic and foreign advertisements, construction and maintenance management of highway projects and domestic trade. Guangzhou Investment in technical Putian Contr No.201, industries and provision of Limited Huangpu Zhongzhi olled Cao relevant consulting 31243 liability West Jianhong 500 60% 60% 167-7 Technology subsi Road,Guan services, research and Company Industry diary gzhou development of lighting Co., Ltd. technology The company‘s subsidiary’s registered capital alter situation （Unit：RMB’0000） Amount at year Increase in Decrease in Amount at Name beginning this period this period period end Nanhai Yayao 1,000 1,000 149 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot 3. Main information of joint-owned company and joint ventured company details in the Notes 5(7)1 4.Other related parties. Relation with the Company Organization Code Name Guangdong Expressway Co., Ltd. Fully owned subsidiary of the 190330413 parent company Guangdong Highway Construction Co., Fully owned subsidiary of the 190335177 Ltd. parent company Guangdong Jingtong Enginneering Fully owned subsidiary of the 23111091X Construction Group Co., Ltd. parent company Guangdong Nanyue Logistics Co., Fully owned subsidiary of 719285123 Ltd. the parent company contral interest subsidiary of the 190334510 Guangdong Changda highway Co., Ltd. partent company Guangdong Communication Industry Fully owned subsidiary of the 190366459 Investment Company parent company Xinyue Communication Investment contral interest subsidiary of the 境外企业 Co., Ltd. partent company contral interest subsidiary of the 231129768 Guangdong Guanyue Luqiao Co., Ltd. partent company Guangdong Hualu communication contral interest subsidiary of the 736195293 Technology Co., Ltd. partent company Guangdong Highway Survey and contral interest subsidiary of the 455857836 Design Institute partent company Guangdong Gaoda Property contral interest subsidiary of the 707685592 Development Co., Ltd. partent company Guangdong East Thinking Management contral interest subsidiary of the 724762107 Technology Development Co., Ltd. partent company Guangzhou Xinruan Computer contral interest subsidiary of the 725017352 Technology Co., Ltd. partent company Guangdong Communication Fully owned subsidiary of the 190324937 Development Company parent company Guangdong Tongyi Expressway contral interest subsidiary of the 724795996 Services Area Co., Ltd. partent company Guangdong Xiangfei Highway Fully owned subsidiary of the 23110364-6 Engineering Management Co., Ltd parent company contral interest subsidiary of the 714289942 Guangzhou Xinyue Asphale Co., Ltd. partent company Guangdong Guansheng Civil contral interest subsidiary of the 766557961 Engineering Technology Co., Ltd. partent company contral interest subsidiary of the 231125505 Guangdong Lulutong Co., Ltd. partent company (II) Related transactions. 1. The transactions among the subsidiaries that have controlling relations and have been incorporated into the consolidated accounting statements of the Company and the transactions among the parent companies and subsidiaries have been offset. 2 Related transactions on purchasing goods and receiving services 150 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot Types Number happened in Number happened in last of Pricing current period period Content of Related relate principle of related parties d related Amount Proportion Amount Proportion transaction （RMB） （％） （RMB） （％） transa transactions ctions 1. Operatin g costs Guangdo ng Receiv Project Changda ing Market price 27,972,572.00 7.31% 11,198,866.50 3.32% fund highway labor Co., Ltd. Guangdo ng Highway Receiv Survey ing design fee Market price 3,884,484.00 1.01% 747,957.80 0.22% and Design labor Institu te Xinyue Communi Receiv cation Project ing Market price 1,405,974.00 0.37% 3,306,918.00 0.98% Investme fund nt Co., labor Ltd. Guangdo ng Receiv Project Guanyue ing Market price 19,111,211.50 4.99% 12,141,244.13 3.60% fund Luqiao labor Co., Ltd. Guangdo ng Hualu communi Receiv Project cation ing Market price 762,415.00 0.23% fund Technolo labor gy Co., Ltd. Guangdong Guanghui Receiv Project Expressw ing Market price 612,500.00 0.16% ay Co., fund labor Ltd. Guangdo ng Jingtong Receiv Enginneer Project ing Market price 23,637,712.00 6.17% 8,386,667.00 2.48% ing fund Construct labor ion Group Co., Ltd. Guangzho Receiv u Xinruan Project ing Market price 227,700.00 0.07% Computer fund Technolo labor 151 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot Types Number happened in Number happened in last of Pricing current period period Content of Related relate principle of related parties d related Amount Proportion Amount Proportion transaction （RMB） （％） （RMB） （％） transa transactions ctions gy Co., Ltd. Guangdong Receiv Expressw Project ing Market price 54,309.50 0.01% ay Co., fund Ltd. labor Guangdo ng Xiangfei Highway Receiv Project Engineeri ing Market price 199,905.00 0.05% 98,746.58 0.03% fund ng labor Managem ent Co., Ltd Guangdo ng East Thinking Managem Receiv ent Project ing Market price 1,464,853.00 0.43% Technolo fund gy labor Develop ment Co., Ltd. Subtotal of Operati 76,878,668.00 20.08% 38,335,368.01 11.35% ng costs 2.Manage ment expenses Guangdo ng Highway Receiv Survey ing design fee Market price 385,000.00 0.38% and Design labor Institu te water electricit Guangdo y gas ng Gaoda and rental fee， Property anyother management public Market price 2,347,070.67 2.33% 2,479,365.83 2.58% Develop fee and water & affairs electricity fee ment Co., fee Ltd. （ purch ased） Subtotal of 2,732,070.67 2.71% 2,479,365.83 2.58% Managem 152 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot Types Number happened in Number happened in last of Pricing current period period Content of Related relate principle of related parties d related Amount Proportion Amount Proportion transaction （RMB） （％） （RMB） （％） transa transactions ctions ent expenses 3.Non- Operatin g expwnses Guangdo ng Receiv Project Changda ing Market price 20,000,000.00 55.70% 40,000,000.00 72.38% fund highway labor Co., Ltd. Subtotal of Non- Operati 20,000,000.00 55.70% 40,000,000.00 72.38% ng expwnses 4. Constructio n on process Guangdo ng Receiv Project Changda ing Market price 172,989,599.60 19.34% fund highway labor Co., Ltd. Guangzho Receiv u Xinyue Project ing Market price 38,489,310.00 4.30% Asphale fund Co., Ltd. labor Guangdo ng Highway Receiv Survey ing design fee Market price 14,948,370.00 1.67% 2,668,792.00 0.63% and Design labor Institu te Guangdo ng Receiv Project Guanyue ing Market price 93,595,370.00 10.47% 6,890,091.00 1.62% fund Luqiao labor Co., Ltd. Guangdo ng Receiv Communi Project ing Market price 42,671,745.20 4.77% cation fund Develop labor ment 153 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot Types Number happened in Number happened in last of Pricing current period period Content of Related relate principle of related parties d related Amount Proportion Amount Proportion transaction （RMB） （％） （RMB） （％） transa transactions ctions Company Xinyue Communi Receiv cation Project ing Market price 16,275,412.00 1.82% 2,814,618.00 0.66% Investme fund nt Co., labor Ltd. Guangzho u Xinruan Receiv Computer Project ing Market price 385,000.00 0.09% Technolo fund gy Co., labor Ltd. interest and Guangdong Receiv mandatory Expressw ay Co., ing construction Market price 34,171,760.07 3.82% 167,059,941.59 39.36% labor management Ltd. fee Guangdo ng East Thinking Managem Receiv ent Project ing Market price 1,339,540.20 0.32% Technolo fund gy labor Develop ment Co., Ltd. Guangdo ng Receiv Highway Project ing Market price 8,800,000.00 0.98% Construct fund ion Co., labor Ltd. Guangdo ng Hualu communi Receiv Project cation ing Market price 5,738,808.40 0.64% fund Technolo labor gy Co., Ltd. Guangdo ng Guanshen g Civil Receiv Project Engineeri ing Market price 123,564.00 0.01% fund ng labor Technolo gy Co., Ltd. 154 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot Types Number happened in Number happened in last of Pricing current period period Content of Related relate principle of related parties d related Amount Proportion Amount Proportion transaction （RMB） （％） （RMB） （％） transa transactions ctions Subtotal of Constructio 427,803,939.27 47.83% 181,157,982.79 42.68% n on process 5.Fixed Assets Guangdo ng Project purchase Changda Market price 6,893,266.00 1.38% assets fund highway Co., Ltd. Guangzho u Xinruan Computer purchase Project Market price 772,000.00 0.15% Technolo assets fund gy Co., Ltd. Xinyue Communi cation Purchase Project Market price 664,488.00 0.13% Investme assets fund nt Co., Ltd. Subtotal of Fixed 8,329,754.00 2.13% assets 535,744,431.94 261,972,716.63 3. Related transactions on purchasing goods and receiving services Number happened in Number happened in Pricing Types of Content of current period last period Related principle of related related parties related Amount Proportion Amount Proportion transactions transaction （RMB） （％） （RMB） （％） transactions 1. Operating income Guangdong Guanghui Receiving Project Market price 1,043,111.11 0.09% Expressway labor fund Co., Ltd. Xinyue Communication Receiving Project Market price 817,958.69 0.09% 6,611,713.86 0.59% Investment Co., labor fund Ltd. Guangdong provide place Guanyue Luqiao access rights place rent Market price 172,512.00 0.02% Co., Ltd. 990,470.69 0.11% 7,654,824.97 0.69% 155 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot 4.Other Relationships and Transactions （1）The Company provided commission loans for Guangdong Fokai Expressway Co., Ltd through Guangdong Yuecai Trust and Investment Company. According to the resolution of third meeting of the third Board of Directors of Guangdong Fokai Expressway Co., Ltd held on Jul.30, 2002, from January 1, 2002 to December 31, 2002, the rate of commission loans of the shareholders is adjusted to zero. According to the Shareholders Meeting of Guangdong Fokai Expressway Co., Ltd held on Jan. 24, 2003, Guangdong Fokai Expressway Co., Ltd got bank loan 1.7 Billion Yuan in 2003, which is used to return the commission loan of all the shareholders of Guangdong Expressway Development Co., Ltd and 50% shareholders commission loan of the Guangdong Expressway Co., Ltd. The interest rate of the other 50% shareholders commission loan of Guangdong Expressway Co., Ltd refers to the rate of bank loan of Guangdong Fokai Expressway Co., Ltd (the loan of 1.7 billion Yuan). As December 31, 2008, Guangdong Fokai Expressway Co., Ltd accounted the expenditure of shareholders loan interest RMB 21,890,967.60 from one of the shareholders Guangdong Expressway Co., Ltd, As of December 31, 2008, Guangdong Fokai Expressway Co., Ltd still owes Guangdong Expressway Co., Ltd the shareholders commission loan RMB 458,324,803.54. （2）In March 18, 2002, the Company signed the Supplementary Agreement of Agreement on Transferring the Investment Equity of Guangdong Maozhan Expressway Co., Ltd, reached the following agreement: (1) The company paid the Reduction Pre-payment Fund RMB 79.975 million Yuan to Guangdong Transportation Industry Investment Co., Ltd. After the reduction, the actual Pre-payment fund received is 228.50 million; (2) If the Agreement of Transfer is not approved by the relevant Government Department, the Company will pay the actual fund back to Guangdong Transportation Industry Investment Co., Ltd, and according the Income Reduction of this time, pay the fund, paying the interest of the actual received fund according to the bank interest in the same period. (3) If the Agreement of Transfer is eventually approved by the relevant Government Department, then Guangdong Transportation Industry Investment Co., Ltd need to pay the transfer fund 194.225 million Yuan to the Company 15 day after the Transfer of Agreement being in effect. On December 27, 2002, the Company signed the Supplementary Agreement(II)of Agreement on Transferring the Investment Equity of Guangdong Maozhan Expressway Co., Ltd, reached the following agreement: the Company pays Reduction Pre-payment fund 20.00 million Yuan to Guangdong Transportation Industry Investment Co.,Ltd. After returning the Pre-received fund according to the agreements in the Supplementary Agreement, the Company received the original value of Pre-payment fund 14,275,000.00 Yuan. From Jan. to Jun. in 2008, the Company accounted the interest 545,590.50 Yuan for the Pre-received fund. As December 31, 2008, the Company accounted the accumulated interest RMB6,447,981.91 for that Pre-received fund. On April 21, 2008, according to Yue Foreign Trade Letter [2008] No. 425 issued by Guangdong Foreign Trade and Economic Cooperation Office "Reply to the funding issue of Guangdong Maozhan Expressway Co., Ltd.", the original partner ( Hong Kong) Southeast Asia Maofa Company, Hong Kong Xinyue Co., Ltd., Zhanjiang Expressway Company, Maoming Transportation Construction Company failed to pay in time, they exited from Guangdong Maozhan Expressway Co., Ltd.; Guangdong Maozhan Expressway Co., Ltd. was continuly operated by Guangdong Provincial Expressway Company. Through the the fifth meeting of the Board of the company and the third provisional shareholders meeting in 2008, agreed to stop transferring 20% shares of Guangdong Maozhan Expressway Co., Ltd., and authorized the Chairman to sign "Agreement on Canceling the : the total budget approved as RMB 4,002,409,114.00, total construction period of the project is (since the date of opening) four years. 3. on September 18, 1998, the company signed the Contract on Cooperative Construction & Operation of JingZhu Expressway (Tangtang-Taihe) with Guangdong Road & Bridge Construction & Development Company, Dajian Industrial Co., Ltd, Guangdong Communications Department and the Office of Introduction of Foreign Capital, the four parties, and cooperated to establish Jingzhu(Tangtang –Taihe) Expressway Co., Ltd, and cooperated to construct, operate, manage the Jingzhu expressway and its supporting facilities. The total investment of the first phase of the project is about 2600.00 million Yuan, the registered capital of the first phase of the cooperation company is 910 million Yuan. The capital proportion of the Company is 25%, the investment amount 227.50 million Yuan. This contract is awaiting approval from the relevant Government 165 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot Department. As December 31, 2008, the fund of the Company has not invested yet. 4. In May 2000, the Company signed the Contract on Construction & operation of the Expressway of Ji ngzhu Major Route Xiaotang-Gantang, and cooperated to establish Guangdong Jingzhu North Expressway Co., Ltd to construct and operate the expressway of Jingzhu Major Route Xiaotang-Gantang. The total investment of the project is 5657million Yuan, the registered capital 566.70 million Yuan. The capital of the project( including the registered capital)is 35% of the general investment, namely 1,979.95 million Yuan, the investment proportion of the Campany 10%. The capital other project shall be paid according to the investment proportion. The investment amount of the project of the company is 1,979.95 million Yuan. Guangdong Expressway Co., Ltd is responsible for the construction of the project. This contract is awaiting approval from the relevant Government. As December 31, 2008, Department. the fund of the Company has not invested yet. 5. The controlling subsidiary of the company Guangdong Fokai Expressway Company started the expansion project of Fokai Expressway Xiebian to Sanbao, and entrusted Guangdong Provincial Expressway Company to manage the project. details in the Notes 7(II)4(3)and (4) the fund of the Company has not invested yet. (II) The Renting Contract signed that is being implemented or is ready to be implemented and its financial influences. The controlling subsidiary of the company Guangdong Expressway Technology Investment Co., Ltd. signed the and related supplementary agreements with Guangdong Guanghui Expressway Co., Ltd., Guangdong Expressway Technology Investment Co., Ltd. leased advertisement position from Guangdong Guanghui Expressway Co., Ltd. the total rental fee reduced to 25.20 million Yuan, the leasing period from July 1, 2006 to June 30, 2016. (III) The other Agreements signed that is being fulfilled or is ready to be fulfilled. 1, The Company intended to transfer all the actual investment on Guangdong Maozhan Expressway Co., Ltd and signed the Agreement on Transferring the Investment Equity on Guangdong Maozhan Expressway Co., Ltd and its relevant Supplementary Agreement with Guangdong Transportation Industry Investment Company. Discussed in the provisional meeting of the fifth Board of Trustee and the third provisional shareholders meeting in 2008, agreed to end the transfer of 20% equity of Guangdong Maozhan Expressway, and authorized the Chairman to sign "Agreement on Canceling the Agreement of transferring the investmernt equity of Guangdong Maozhan Expressway Co., Ltd. and the Supplemental Agreement and Supplemental Agreement (B)". The Company and Guangdong Transportation Industrial Investment Company signed the "Agreement on Canceling the Agreement of transferring the investmernt equity of Guangdong Maozhan Expressway Co., Ltd. and the Supplemental Agreement and Supplemental Agreement (B)": 1, Both parties agreed to cancel the" transfer agreement", the supplemental agreement and the supplemental agreement (B); 2, The Company agreed to refund the transfer fund prefaid to Guangdong Transportation Industrial Investment Company, the interest produced was accounted according to the state bank credit interet; 3, In five days after the validity of the 166 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot agreement, the principal transfer fund and interest would be paid; 4, The agreement would be in effect since the date of signing and sealing with approval from authorities of both parties. Other notes see “七（2）4（2）” X. Events Occurring After the Balance Sheet Date. (I)Board of Directors after the balance sheet date (II)The balance sheet 1 year after the implementation of major asset reorganization. XI. Other events 1．Fokai Expressway has operated Jiujiang Bridge’s management and maintain, 2007, June 15 early in the morning, The No. 035 Sand ship owned by Yang Xiong and operated by Foshan Nanhai Yuhang Ship Co., Ltd. collided Jiujiang Bridge on 325 State Road which owned by the controlling subsidiary Fokai Company. due to the deviation channel of the sand delivering ship in Jiujiang channel and straightly hit Jiujiang Bridge, leading the 200m height bridge’s partial collapsed that block the transportation on the bridge. Up to the deadline for submitting reports, Jiujiang Bridge was still closed to transportation. On June 19,2007， The Ministry of Communications, the State Production Safety Supervision and Administration Commission issued the JiaoAnWeiming File [2007] No. 8 "Notification on the Guangdong"6.15 "Jiujiang Bridge Collision Accident", initially determined the causes of the accident are: the incident ship suddenly met heavy fog on the way from Foshan Gaoming to Sunde, the captain neglected looking out, did not take proper measures and deviated from the main channel, touched the 325 National Road Jiujiang Bridge the non-navigation bridge pier and caused the collapsion of part of the Jiujiang bridge. The accident was an unilateral responsibility of the ship. On July ,2007，Fokai Company applied preservation of property to Guangzhou Maritime Court.On August 22,2007，Fokai Company officially prosecuted to Guangzhou Maritime Court, asking Foshan South Sea Shipping Company Limited and Yang Xiong to undertake the conpensation 25,587,684 yuan for the loss caused by collapsion of Jiujiang Bridge. On August 28, 2007, Guangzhou Maritime Court accepted the case. According to the (2007)-Canton Haifa No. 332 ruling book issued by Guangzhou Maritime Court, the proceeding of the case was suspended. After the court accepted the case, the incident investigation team of Guangdong Provincial Government had not made the final report of Jiujiang Bridge accident. The Court, on November 5, 2007, decided to suspend the proceeding. In September 2008, Jiujiang Bridge accident investigation report was officially reported and resumed the proceedings. On December 5, 2008, Guangzhou Marine Court opened a court trial to procceeded the case. Currently, Guangzhou Haizhu prosecutorial office was intend to prosecute the accident captain Shi Guide, therefore, on January 5, 2009, Guangzhou Maritime Court ruled the suspension of the case. By the date of the statement, the plan and reconstruction program of Jiujiang Bridge was being reported, and the insurance compensation program was under negotiations with insurance companies. 2. The 8th meeting of the third board of directors of the Company held on December 15, 2000 examined and adopted the proposal that Guangfo Expressway was to participate in the 167 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot construction of Yayao pivotal flyover project. Guangfo Expressway signed the Contract for Establishing Yayao Pivotal Flyover Project Construction Co., Ltd. and the Agreement for the Construction of Yayao Pivotal Flyover Project by Cooperation with Foshan Communications Development Corporation and Nanhai Communications Construction Group Co., Ltd. on December 28, 2000. The cooperative parties signed Supplementary Contract for the Construction of Yayao Pivotal Flyover Project by Cooperation on December 29, 2000 to jointly establish Nanhai Yayao Pivotal Flyover Project Construction Co., Ltd. and construct Yayao pivotal flyover project. The estimated investment of the project is around RMB 120 million and its registered capital is RMB 10 million. Guangfo Expressway was to contribute capital that accounts for 60% of total investment. The funds in addition to registered capital are to be invested in the form of shareholders’ loan. According to unanimously adopted resolution of the shareholders’ meeting of Nanhai Yayao, Foshan Highway Bureau became a new shareholder. After the change, the investment amount and proportion of Guangfo Expressway remained unchanged. On September 10, 2007, Yayao Hub Interchange Construction Co., Ltd. passed a resolution in the shareholders meeting, September 30, 2007 will be regard as the liquidation date, to make liquidation and cancellation of the company. According to settlement program, the shareholders divided the assets of the company by the division method of combination of physical objects and book account, Guangfo Expressway Co., Ltd. obtained the F+A ramp of the project, the asset of F ramp was used by Guangfo Expressway Co., Ltd., and Guangfo Expressway Co., Ltd. was responsible for the management and day-to-day Conservation, until the date of ending operation by Guangfo Expressway Co., Ltd., all shareholders will entrust all the remaining fixed assets to Foshan Nanhai Transport Group Co., Ltd. for maintenance. From 2008 to 2018, the maintenance costs will be according to the investment ratio of the shareholders of the original project. In which, Guangfo Expressway Company should pay the maintenance fee for F ramp. By the reporting date, the project company has been cancelled. In view of these facts, Guangfo Expressway Co., Ltd. transferred the Nanhai Yayao Project from intangible assets to fixed assets, which using car flow depreciation according to the rest operating years of Guangfo Expressway Co., Ltd. from April 2008 onwards. 3. The 8th meeting of the third board of directors of the Company held on December 15, 2000 examined and adopted the proposal that Guangfo Expressway was to participate in the construction of Xiebian pivotal flyover project. Guangfo Expressway signed the Contract for Establishing Xiebian Pivotal Flyover Project Construction Co., Ltd. and the Agreement for the Construction of Xiebian Pivotal Flyover Project by Cooperation with Foshan Communications Development Corporation and Nanhai Communications Construction Group Co., Ltd. on December 28, 2000. The cooperative parties signed Supplementary Contract for the Construction of Xiebian Pivotal Flyover Project by Cooperation on December 29, 2000 to jointly 168 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot establish Foshan Xiebian Pivotal Flyover Project Construction Co., Ltd. and construct Xiebian pivotal flyover project. The estimated investment of the project is around RMB 320 million and its registered capital is RMB 30 million. Guangfo Expressway was to contribute capital that accounts for 33% of total investment. According to unanimously adopted resolution of the shareholders’ meeting of Foshan Xiebian, Foshan Highway Bureau became a new shareholder. After the change, the investment amount and proportion of Guangfo Expressway remained unchanged. Foshan Xiebian pivotal flyover project was handed over for inspection and acceptance on October 16, 2002. According to the minutes and resolutions of the fourth meeting of the board of directors of Foshan Xiebian Pivotal Flyover Project Construction Co., Ltd. held on December 26, 2002, the issues concerning the assets and maintenance after final acceptance were suggested to be handled by government due to its complexity. As the Company still reserves the use right of this pivotal flyover and bears part of assets maintenance costs, Foshan Xiebian pivotal flyover project is to be transferred into intangible assets from long-term equity investment and long-term creditor's right investment for accounting,. Amortization was carried out from October 2002 according to the remaining operation period of Guangfo Expressway Co., Ltd. On Setember 3, 2007,Foshan Xiebian Hub Interchange Construction Company decided to be cancelled after all shareholders meeting, the company regards September 30, 2007 as the liquidation date, the liquidation will be ended by December 11, 2007, and will pay all the settlement costs and clear up all the surplus properties after the liquidation, including monetary fund and a car being allocated to Foshan Traffic Development Corporation, and was use for cost for land demolition, project fund, and all the follow-up cost for project maintenance of the Xiebian Hub Interchange, Foshan Xiebian Hub Interchange Project will be allocated to investors according to investment ratio. Guangfo Expressway Co., Ltd. obtained the M, E, F, N, C, A ramp, and all shareholders entrusted the fixed assets to Foshan Expressway Co., Ltd. to maintain and manage them. And Xiebian Guangfo Expressway toll station and the squares (including 10 high-pole lamps in the square) will be used by Guangfo Expressway Co., Ltd., and Guangfo Expressway Co., Ltd. is responsible for day-to-day management and maintenance, until the date of ending the operation of Guangfo Expressway Company. After the liquidation, all financial information of the project company will be handed over to oshan Traffic Development Corporation for custody. By the reporting date, the project company has been cancelled. In view of these facts, Guangfo Expressway Company will transfer the Foshan Xiebian Interchange Intangible Assets into fixed assets, from January 2008, the rest operation period of Guangfo Expressway Company will adopt the vehicular traffic volume depreciation method. 4. The Company held temporary shareholders meeting on December 20, 2006, examined and adopted the . Agreed in principle with Guangdong Fokai Expressway Company as the original right person, Guangdong Securities Co., Ltd. as the plan administrator establishing "Fokai Expressway Equity Beneficiary Special Certificate" for low-cost financing, with planed financing amount RMB 1 billion Yuan, period one to five years, funds collected at this time will replace the bank loan of Guangdong Fokai Expressway Company; the board of directors and managing level of Guangdong Fokai Expressway Co., Ltd. will decide the related matters according to the need of the company, including the issuance interest rates of the certificate, all contract for the implementation of the special asset management plan. On December 14, 2006, Guangdong Fokai Expressway Company and Guangfa Securities Co., Ltd. signed a , the agreement agreed 169 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot the special plan charged was 0.768 percent of the funding amount, it was 7.68 million yuan according to 10 billion financing amount. Guangdong Fokai Expressway Company paid 40% in advance. As of December 31, 2008,The special asset management plan has not been established. 5. On April 2007, Guangdong Expressway Technology Investment Co., Ltd. initiated a lawsuit to Shenzhen Intermediate People's Court, approving in April 2003 the company invested 30 million yuan to participate in Qinghai Securities Company (now it was changed to Kunlun Securities Co., Ltd., and in October 2006, Xining Intermediate People's Court ruled it to enter the insolvency proceedings), two original shareholders of Qinghai Securities Company (Qinghai Digital Network Investment (Group) Co., Ltd., Shenzhen Sitong Investment and Development Company) hide their debts and losses and made false investor, in April 2003, the other three new shareholders (Qinghai Enterprise Technology Innovation Investment Management Co., Ltd., Xining Special Steel Group Co., Ltd., Fulin Group (Shenzhen) Limited shares Company) escaped investment fund, and the accounting institution of Qinghai Securities Company Co., Ltd. (Fulian Joint Accounting Firm Co., Ltd.) made major faults in capital verification. According to the above reasons, Guangdong Expressway Technology Investment Co., Ltd. made requirements on the 30 million investment loss of Kunlun Securities Co., Ltd. that: Qinghai Digital Network Investment (Group) Co., Ltd., Shenzhen Sitong Investment Development Co., Ltd., Qinghai Enterprise Technology Innovation Investment Management Co., Ltd., Xining Special Steel Group Co., Ltd., Fulin Group (Shenzhen) Co., Ltd. had joint liability on the 30 million yuan investment loss; Wulian Joint Accounting Firm Co., Ltd. had joint liability on the investment loss if Qinghai Digital Network Investment (Group) Co., Ltd. and Shenzhen Sitong Investment and Development Company Limited can not pay the investment loss. Shenzhen Intermediate People's Court has accepted the case, the defendant has put forward relevant jurisdiction objections, in October 2007, Shenzhen Intermediate Court decided to reject the objection of jurisdiction, the defendants refused to accept the ruling and they had appealed to Guangdong Provincial Higher People's Court. On June 7, 2008, Guangdong Provincial Higher People's Court issued the (2008) Yue Supreme People's Court Yue Civil No. 159 civil ruling book, the appeal was rejected and upheld the original award. The defendants refused to accept the civil award, and on November 17, 2008, application was offered to the Supreme People's Court for retrial, and the Court had received it. On December 30,2008，Guangdong Expressway Investment Co., Ltd. and Shenzhen Sitong Investment Co., Ltd. received a reconciliation agreement. On the same day, Guangdong Guangdong Expressway Technology Investment Co., Ltd. applied to Guangdong Shenzhen Intermediate People's Court to withdraw the procecution for the reason that Guangdong Expressway Technology Investment Co., Ltd. and the party concerned had reached. On January 9, 2009, Guangdong Expressway Technology Investment Co., Ltd. received the civil ruling file (2007) Shen Civil No.135 ruled by Shenzhen Intermediate People’s Court, approving Guangdong Expressway Technology Investment Co., Ltd. to withdraw the procecution. 6. Our company has held Provisional Meeting of the third Board of Directors and examined and adopted the proposal for company issuing bonds issued in Renminbi on Dec 12,2008, intend to issue at most 1.3 billion bonds, claim limit not exceed 10 years. 7.The general meeting of shareholders authorize board of directors to conduct issuing RMB Bonds。 board of directors has arranged management team and relevant servicers to report issuing RMB bonds materials to CSRC. 170 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot XII. .Supplement Information (1) Items of Non-recurring Gains & Losses Items Amount （1）Gain/loss form disposal of non-current assets and Provision for -31,781,537.83 impairment of assets including the preparation of the write-off part . (2)Tax refund, deduction and exemption that is examined and approved by authority exceeding or has no official approval document. (3)Governmental Subsidy accounted as current gain/loss, except for those subsidies at with amount or quantity fixed by the national government and closely related to the Company’s business operation. (4)Capital occupation fee collected from non-financial organizations and accounted as current gain/loss. (5)Gain/loss generated when the consolidation costs is less then the recognizable fair value attributable to the Company. (6)Non-monetary asset exchange gain/loss. （7）Gain/loss investment of Commission (8)Asset impairment provisions for force major such as natural disasters (9) Gain/loss from debt reorganization (10) Enterprise reorganization expenses, such as payment to stuff placement and consolidation expenses (11) Gain/loss from trades obviously departed from fair value (12) Net gain/loss of current term from consolidation of subsidiaries under common control from beginning of term to the consolidation date (13) Gain/loss from debt forcasting without connection to the main business operation （14）In addition to normal business with the company effective hedging related business, holders of tradable financial assets, transactions and financial liabilities arising from changes in fair value gains and losses, as well as the disposal of trading of financial assets, trading financial liabilities and available-for-sale financial assets gains return on investment; （15）Single impairment test for impairment of receivables transferred 710,349.92 back to preparation （16）Commissioned external loans by the Gain/loss （17）The use of fair value measurement model of follow-up to the fair value of real estate investment gains and losses arising from changes （18）According to tax, accounting and other laws, regulations, the requirements of the current Gain/loss for a one-time adjustment of the impact of the current Gain/loss; （19）Entrusted with the operating of the trust to obtain fee income （20）Net amount of non-operating income and expense except the 122,006.20 171 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot Items Amount aforesaid items （21）Other non-recurring Gains/loss items （22）Amount of influence of minority interests 5,345,192.38 （23）Amount of influence of income tax 10,090,761.71 Total -15,513,227.62 （2）Return on net assets and earnings per share Return on net assets（%） Earnings per share（RMB） Profit of the report period Weighted Weighted Fully diluted Fully diluted average average Net profit attributable to the 11.64% 11.90% 0.32 0.32 owners of Company. Net profit attributable to the owners of Company after 12.09% 12.36% 0.33 0.33 deducting of non-recurring gain/loss. 1.Calculation process The following data is calculated by these formula: （1）Fully diluted return on equity Fully diluted return on equity=P÷E Of which:P refers to Net profit attributable to common shareholder of the Company or net profit after deducting non-recurring gains and losses attributable to common shareholder of the Cmpany ; E refers to net assets at the period-end attributable to common shareholders of the company. When the Company prepared and disclosed the consolidated statement, “ Net profit attributable to common shareholder of the Company” excluded minority interest, : net profit after deducting non-recurring gains and losses attributable to common shareholder of the Company” would be calculated based on consolidated net profit after deducting minority interests; deducting non-recurring gain and loss of parent company(ther company should consider influence of income tax) and non-recurring gain and loss of each subsidiary (the company should consider influence of income tax) and non-recurring gain and loss of each subsidiary (the company shluld consider influence of income tax); : net assets at the period-end attributable to common shareholders of the company” excluded minority interests. （2）Weighted average return on equity Weighted average return on equity=P/（E0＋NP÷2＋Ei×Mi÷M0－ Ej×Mj÷M0±Ek×Mk÷M0） Of which：P REFERS TO Net profit attributable to common shareholder of the Company or netprofit after deducting non-recurring gains and losses attributable to common shareholder of the Company; NP refers to net profit attributable to common shareholders of the Company; EO refers to net assets at the period-begin attributable to common shareholders of the company; Ei refers to net assets increased due to issuance of new 172 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot share ordebts for equity swap or attributable to common shareholders of the Company; Ej refers to net assets decreased due to repurchased or dividends in cash or attributable to common shareholders of the Company; Mo refers to the number of months during the report period; Mi refers to the number of months from the next month when net assets decreased to the end of the reort period; Ek refers to change of increase/decrease of net assets due to other transaction events; Mk refers to the number of months from the next month when other net assets changed the end of the report period. （3）Earnings per share-basis EPS=P÷S S=S0＋S1＋Si×Mi÷M0-Sj×Mj÷M0-Sk Of which：P refers to net profit attributable to shareholders holding ordinary shares or net profitattributable to shareholders holding ordinary shares after deducting non-recurring gains and lossesl S weighted average number of ordinary shares issued out; S0 refers to total number of shares at the period-begin; S1 refers to the number of shares increased due to transferring capital reserve into share capital or dividend distribution of shares during the report period; Si referrs to the number of shares incueased due to issuance of new shares or debt for equity swap during the report period; Sj refers to the number of shares decreased due to stock repurchase during the report period; Sk refers to the number of split-share during the report period; M0 refers to the number of months during the report period; Mi refers to the number of months from the next monthe to the end of the report period for increase of sharesl Mj refers to the number of months from the next month to the end of the report period for decrease of shares. （4）Earnings per share-diluted EPS-diluted=[P+（Potential diluted interests of ordinary shares recognized as expense－ Transfer fee）×（1-income tax rate）]/（S0＋S1＋Si×Mi÷M0-Sj×Mj÷M0-Sk+weighted average amount of ordinary shares increased due to warrant , share options, convertible bood. Of whichA:P refers to net profit attributable to shareholders holding ordinary shares or net profit attributable to shareholders holding ordinary shares after deducting non-recurring gains and losses; The Company shall consider all influence on potential diluted interests of ordinary shares when the company calculated diluted earnings per share, till to minimum diluted EPS . (II) The ordinary shares which have no dilution in the current period but may have dilution in the future accounting period. No such cases exist in the company in the current period. (III) From the balance sheet date to the report date of the approval of financial report, major changes in ordinary share and potential ordinary share number issued by the company No such cases exist in the company in the current period. XIII.The approval of the financial statement report The report of the financial statements was approved by all directors of the board of directors of the Company on February 20,2009. The Board of Directors of Guangdong Provincial Expressway Development Co., Ltd. 173 Guangdong Provincial Expressway Development Co.,Ltd 2008 Annual Reprot February 20,2009 174