武锅Ｂ(200770)2008年年度报告（英文版）

WUHAN BOILER COMPANY LIMITED ANNUAL REPORT 2008 Disclosing Newspaper: Securities Times and Ta Kung Pao Disclosing Date: April 27, 2009 1 Contents I. Important Notes----------------------------------------------------------------------------- 3 II. Company Profile---------------------------------------------------------------------------- 4 III. Summary of Accounting Data and Business Data-------------------------------------- 5 IV. Changes in Share Capital and Particulars about Shareholders------------------------ 6 V. Particulars about Directors, Supervisors and Senior Executives and Employee--10 VI. Corporate Governance-------------------------------------------------------------------- 18 VII. Brief Introduction to the Shareholders’ General Meeting -------------------------- 23 VIII. Report of the Board of Directors ----------------------------------------------------- 24 IX. Report of the Supervisory Board-------------------------------------------------------- 33 X. Significant Events------------------------------------------------------------------------- 36 XI. Financial Report--------------------------------------------------------------------------- 40 XII. Documents for Reference----------------------------------------------------------------40 2 Section I Important Notes ● The Board of Directors, the Supervisory Board as well as directors, supervisors and senior executives of Wuhan Boiler Company Limited (hereinafter referred to as “the Company”) hereby confirm that there are no misstatements, misleading statements or material omissions in this Annual Report and will take individual and/or joint and several liabilities for the authenticity, accuracy and completeness of this Annual Report. ● No director, supervisor and senior executive has disagreements to the authenticity, accuracy and completeness of this Annual Report. Because the board director, Mr. Jean-Michel Aubertin, is in a business trip overseas and can’t arrive in China on time to attend the meeting of the Board of Directors, he authorized Mr. YEUNG Kwok Wei Richard, the Chairman, in written on his behalf to attend, discuss and vote at the meeting. ● The Financial Audit Report 2008 of the Company had been audited by Wuhan Zhonghuan Certified Public Accountants Ltd, and a standard unqualified Audit Report had been issued. ● Mr. YEUNG Kwok Wei Richard (Yang Guowei), the Chairman of the Board of Directors, Mr. Philippe VERGNE (Chinese Name: Wu Zhonghan), Chief Financial Officer, and Mr. Zhang Yansi in Charge of Accounting, hereby insure that the Financial Report enclosed in this Annual Report is true and complete. 3 Section II Company Profile I. Legal Name of the Company In Chinese: 武汉锅炉股份有限公司 In English: WUHAN BOILER COMPANY LIMITED Abbr. in English: WBC II. Legal Representative: YEUNG Kwok Wei Richard (Yang Guowei) III. Secretary of the Board of Directors: Qin Liang Contact Address: No. 586, Wuluo Road, Wuhan, Hubei Contact Tel: (027) 87879708 Contact Fax: (027) 87883008 E-mail: kevin.qin@power.alstom.com Securities Affairs Representative: Xu Youlan Contact Tel: (027) 87652719 Contact Fax: (027) 87655152 E-mail: youlan.xu@power.alstom.com IV. Registered Address and Office Address: No. 586, Wuluo Road, Wuhan, Hubei Post Code: 430070 Internet Website: http://www.wbcl.com.cn E-mail: cnwhu.wbc@power.alstom.com V. Newspapers for Disclosing the Information of the Company: Securities Times (Domestic), Ta Kung Pao (Overseas) Internet Website for Publishing the Annual Report: http://www.cninfo.com.cn Place Where the Annual Report is Prepared and Placed: Securities Department of the Company VI. Stock Exchange Listed with: Shenzhen Stock Exchange Stock Abbreviation: WUGUO – B Stock Code: 200770 VII. Other Information of the Company Initial registration date: the Company was formally incorporated on Apr. 8, 1998 Initial registration place: No. 586, Wuluo Road, Wuhan, Hubei The latest registration date: the Company changed its registration with Industrial and Commercial Administration Bureau of Hubei Province as a stock company (Sino-Foreign Joint Venture Company and listed company) on Oct. 26, 2007. The latest registration place: No. 586, Wuluo Road, Wuhan, Hubei Business License No.: 420000400000568 Tax Registration No.: 420106271756432 The Certified Public Accountants engaged by the Company: Wuhan Zhonghuan Certified Public Accountants Ltd Address: 16/F, Tower B, Wuhan International Mansion 4 Section III Summary of Accounting Data and Business Data I. Accounting data for financial year of 2008 Unit: RMB Yuan Item Amount Total profit -372,568,353.42 Net profit -357,672,762.06 Net profit attributable to Shareholders of the Company -353,934,337.61 Net profit after deducting non-recurring gain and loss -358,181,920.48 Operating profit -380,724,287.23 Investment income -1,354,516.32 Net non-operating income and expenditure 8,155,933.81 Net cash flow arising from operating activities -829,589,797.80 Net increase/decrease of cash and cash equivalents -43,813,701.96 Note: Items and amount after deducting non-recurring gains and losses Unit: RMB Yuan Items of non-recurring gains and losses Amount Gains or losses on disposal of non-current assets -468,591.63 other non-operating gains or losses other than above (net) 8,624,525.44 Others extraordinary gains or losses -3,890,745.48 Effect of income tax after deducting extraordinary gains or losses -83,759.18 Effect of deducting minority interest 66,153.72 Total 4,247,582.87 II. Major accounting data and financial indexes of the Company over the last three years 1. Major accounting data Unit: RMB Yuan Increase/decrease Items 2008 2007 ％ from last year ( ) 2006 Operating revenue 1,121,071,252.12 1,770,372,881.47 -36.68% 2,312,038,158.45 Total profit -372,568,353.42 -521,693,773.71 28.58% 33,066,336.50 Net profit attributable to shareholders of the 26.35% -353,934,337.61 -480,602,218.59 12,748,931.97 Company Net profit attributable to shareholders of the Company after deducting non-recurring gains and -358,181,920.48 -481,219,951.18 25.57% 13,269,878.55 losses Net cash flow arising from operating activities -829,589,797.80 -89,934,049.57 -822.44% -660,228,046.84 Increase/decrease Items 2008 2007 ％ from last year ( ) 2006 Total assets 2,867,879,261.58 2,525,381,208.62 13.56% 2,949,075,807.59 Owners’ equity (or shareholders’ equity) -218,289,082.18 135,840,152.09 -260.70% 622,382,370.68 2. Major financial indexes Unit: RMB Yuan Increase/decrease Items 2008 2007 2006 from last year (%) Basic earnings per share -1.19 -1.62 26.54% 0.04 Diluted earnings per share -1.19 -1.62 26.54% 0.04 Basis earnings per share after deducting non-recurring gains and 25.31% -1.21 -1.62 0.04 losses Fully diluted return on net assets -353.80% 2.05% Weighted average return on net assets -126.61% 2.05% 5 Fully diluted return on net assets after deducting non-recurring -354.25% 2.13% gains and losses Weighted average return on net assets after deducting -126.77% 2.13% non-recurring gains and losses Net cash flow per share arising from operating activities -2.79 -0.30 -830.00% -2.22 At the end of At the end of Increase/decrease At the end of Items 2008 2007 from last year (%) 2006 Net assets per share attributable to shareholders of the Company -0.73 0.46 -258.70% 2.10 3. In accordance with Regulations of Information Disclosure and Preparation for Publicly Listed Companies (No. 9) promulgated by CSRC, the Company’s return on net assets and earning per share for year 2008 are calculated based on fully diluted method and weighted average method ● Return on Net Assets In current period The same period of last year Profit in the report period Fully Diluted Weighted Average Fully Diluted Weighted Average Net profit attributable to common shareholders of the Company -353.80% -126.61% Net profit attributable to common shareholders of the -354.25% -126.77% Company after deducting non-recurring gains and losses ●Earnings per Share In current period The same period of last year Profit in the report period Basis earnings Diluted earnings Basis earnings Diluted earnings per share per share per share per share Net profit attributable to common shareholders of the Company -1.19 -1.19 -1.62 -1.62 Net profit attributable to common shareholders of the Company after deducting non-recurring gains and losses -1.21 -1.21 -1.62 -1.62 Section IV Changes in Share Capital and Particulars about Shareholders I. Changes in share capital Unit: Share Before the change Increase/decrease (+, - ) After the change Capitalization Items Issuance of Bonus Amount Proportion of public Other Subtotal Amount Proportion new shares shares reserve fund I. Non tradable shares 172,000,000 57.91% 172,000,000 57.91% 1. Sponsors’ shares 172,000,000 57.91% 172,000,000 57.91% Including: Shares held by the State Share held by domestic corporation 20,530,000 6.91% 20,530,000 6.91% Share held by foreign corporation 151,470,000 51.00% 151,470,000 51.00% Others 2. Raised corporate shares 3.Employees shares 4. Preference shares or others II. Tradable shares 125,000,000 42.09% 125,000,000 42.09% 1. RMB ordinary shares 2. Domestically listed foreign shares 125,000,000 42.09% 125,000,000 42.09% 3. Overseas listed foreign shares 4. Others III. Total shares 297,000,000 100.00% 297,000,000 100.00% II. Issuance and listing of shares (1) On Mar. 20, 1998, the Company issued 125,000,000 domestically listed foreign shares (B shares) to foreign investors at HKD 1.496 per share. The shares were listed in Shenzhen Stock Exchange on Apr. 15, 1998 with the stock code 200770. (2) At the end of this reporting period and inclusive of the last three years, neither shares nor derivative securities were issued. 6 (3) Share structure of the Company never changed in the report period. (4) No employee shares remain within the Company (5) There was no profit distribution of the Company in the report period. III. Introduction about shareholders (1) As at the end of Dec. 31, 2008, the Company had 12,318 shareholders: including one foreign corporate shareholder, Alstom (China) Investment Co., Ltd, one domestic corporate shareholder, Wuhan Boiler Group Co., Ltd, and 12,316 domestically listed foreign shareholders. (2) Shares held by the principal shareholders As at end of Dec 31, 2008, the top ten shareholders and the top ten shareholders holding tradable shares of the Company are as follows: Total number of shareholders 12,318 Particulars about shares held by the top ten shareholders Number of Shares Proportion of Total shares Name of shareholders Nature of shareholders non-tradable shares pledged or shares held held held frozen ALSTOM (CHINA) INVESTMENT Foreign corporation 51.00% 151,470,000 151,470,000 0 COMPANY LIMITED WUHAN BOILER GROUP CO., LTD State-owned corporation 6.91% 20,530,000 20,530,000 0 WANG JIA YI Domestic natural person 0.58% 1,713,699 0 0 CHEN CHU YUN Domestic natural person 0.40% 1,185,900 0 0 HSBC BROKING SECURITIES (ASIA) Foreign corporation 0.37% 1,108,914 0 0 LIMITED-CLIENTS A/C ZHUANG CHANG XIONG Domestic natural person 0.34% 996,500 0 0 WU FANG HUI Domestic natural person 0.30% 889,703 0 0 TANG JUAN Domestic natural person 0.30% 887,236 0 0 SEUNG YEOL PARK Domestic natural person 0.30% 883,713 0 0 GUOTAIJUNAN Domestic non-state-owned 0.29% 859,460 0 0 SECURITIES(HONGKONG) LIMITED corporation Particulars about tradable shares held by the top ten shareholders Name of shareholders Number of tradable shares held Type of share WANG JIA YI 1,713,699 Domestically listed foreign shares CHEN CHU YUN 1,185,900 Domestically listed foreign shares HSBC BROKING SECURITIES (ASIA) 1,108,914 Domestically listed foreign shares LIMITED-CLIENTS A/C ZHUANG CHANG XIONG 996,500 Domestically listed foreign shares WU FANG HUI 889,703 Domestically listed foreign shares TANG JUAN 887,236 Domestically listed foreign shares SEUNG YEOL PARK 883,713 Domestically listed foreign shares GUOTAI JUNAN SECURITIES(HONGKONG) 859,460 Domestically listed foreign shares LIMITED SUN SHAN SHAN 850,000 Domestically listed foreign shares HUAN JIAN WEN 735,952 Domestically listed foreign shares Among the top ten shareholders of the Company, Alstom (China) Investment Co., Ltd. (the first principal shareholder of the Company) and Wuhan Boiler Group Co., Ltd. (the second principle shareholder of the Company) hold non-tradable shares of the Company, the other eight shareholders are public shareholders who hold tradable B shares. During the reporting period, the change of shares held by the other eight shareholders was resulted from trading in the secondary market. Among the top ten shareholders of the Explanation on associated Company, no affiliated relationship exists between Alstom (China) Investment Co., Ltd. (the first relationship among the top ten principle shareholder of the Company), Wuhan Boiler Group Co., Ltd. (the second principle shareholder shareholders or persons acting in of the Company) and the other shareholders, and they are not persons acting in concert as defined in the concert Administrative Rules on Information Disclosure about Changing of Shareholding Status. The Company is not aware of whether there is any affiliated relationship among the top ten shareholders with tradable shares and whether there are persons acting in concert among them. The Company is not aware of whether there is any affiliated relationship among the top ten shareholders and the top ten shareholders with tradable share. 7 (3) The controlling shareholder and actual controller of the Company ● Alstom (China) Investment Co., Ltd is the controlling shareholder of the Company, holding 151,470,000 shares as of Dec. 31, 2008, is the only shareholder holding over 10% shares of the Company. The shares held by Alstom (China) Investment Co., Ltd accounts for 51% of total shares. Legal representative: Mr. Claude Burckbuchler Date of foundation: Jan. 26, 1999 Registered capital: USD 60,964,400 Business License No.: Qi-Du-Guo-Zi No. 000816 Business scope: To invest in the fields of industry, infrastructure and energy that encouraged and permitted by China government for foreign investment, and to provide relevant services ●Alstom Holdings, registered in France, is the controlling shareholder of Alstom (China) Investment Co., Ltd. Legal representative: Mr. Monsieur POUPART-LAFARGE HENRI Date of foundation: Jul. 29, 1988 Registered capital: EUR 624,125,422.20 Business scope: shareholding ●Alstom S.A., a listed company in France, is the controlling shareholder of Alstom Holding. Chairman of the Board and CEO: Mr. Monsieur Patrick KRON Date of foundation: Nov. 17, 1992 Share capital: as of Mar.31, 2007, ALSTOM’s share capital amounts to EUR 1, 940,640,814 Business scope: the conduct of transactions in France and abroad, notably in the following fields: energy, transmission and distribution of energy, transport, industrial equipment, naval construction & repair work and engineering and consultancy, design and/or production studies and general contracting associated with public or private works and construction; and all the activities related or incidental to the above ● Bouygues, a company listed in France holds 30% shares of Alstom S.A. Chairman of the Board and CEO: Mr. Martin Bouygues Date of foundation: 1952 Share capital: EUR 347,502,578 Business Scope: Construction, telecommunication business and other investment ● Other shareholders hold 65.08% shares of Alstom S.A. Other shareholders hold 65.08% shares of Alstom S.A. (4) Illustration on relationship between the Company and its ultimate controlling shareholder 8 FIDELITY INTERNATIONAL Bouygues (Fidelity International and FMR Other shareholders LLC) 30% 4.92% 65.08% ALSTOM S. A. (Listed in France) 100% Alstom Holdings 100% Alstom (China) Investment Co., Ltd 51% Wuhan Boiler Company Limited 9 Section V Particulars about Directors, Supervisors, Senior Executives and Employee I. Basic information of directors, supervisors and senior executives Share excitation authorized during Total Share the reporting period Remuneratio remuneration Beginning Ending Shares at s at Reason Market n drawn from drawn from the Shares date of date of Shares price of shareholder Name Title Gender Age office the year the for Company in the had entities or office to be Exercise stock at beginning year-e change reporting been term term exercis price the other related nd period (Ten exercise ed period-en parties or not thousand) d d Mr. YEUNG Chairman Kwok Wei of the Sep. 25, Sep. 25, Richard Male 59 2007 0 0 0.00 Yes Board of 2010 (Yang Directors Guowei) Sep. 25, Sep. 25, Ms. Liu Yi Director Female 39 0 0 0.00 Yes 2007 2010 Claude Jun. 19, Sep. 25, Director Male 59 0 0 0.00 Yes Burckbuchler 2008 2010 Mr. Sep. 25, Sep. 25, Jean-Michel Director Male 50 0 0 0.00 No 2007 2010 AUBERTIN Mr. Xiang Nov. 5, Sep. 25, Director Male 55 0 0 0.00 Yes Rongwei 2008 2010 Mr. Wang Independen Sep. 25, Sep. 25, Male 54 0 0 RMB 10.00 No Haisu t director 2007 2010 Mr. André Independen Sep. 25, Sep. 25, CHIENG Male 55 0 0 RMB 10.00 No t director 2007 2010 (Qian Faren) Mr. Yang Independen Sep. 25, Sep. 25, Male 48 0 0 RMB 10.00 No Xiongsheng t director 2007 2010 Jun. 19, Sep. 25, Mr. Liang Fei Supervisor Male 45 0 0 0.00 Yes 2008 2010 Ms. Sun Jun. 19, Sep. 25, Supervisor Female 38 0 0 0.00 Yes Tong 2008 2010 Ms. Peng Sep. 25, Feb. 20, Supervisor Female 42 0 0 RMB 32.83 No Hexiang 2007 2009 Aug. Mr. Gérard General Aug. 20, RMB21.18 Male 54 20, 0 0 (Sep-Dec) No VALLEE Manger 2007 2010 Mr. Philippe Aug. VERGNE Finance Aug. 20, RMB 16.98 Male 42 20, 0 0 (Sep-Dec) No (Wu Director 2007 2010 Zhonghan) Mr. Bai Sep. 25, Sep. 25, Vice GM Male 45 0 0 RMB 61.55 No Xixin 2007 2010 Mr. Jin Sep. 25, Sep. 25, Vice GM Male 49 0 0 RMB 29.28 No Zhicheng 2007 2010 Mr. Pei Sep. 25, Sep. 25, Vice GM Male 49 0 0 RMB47.06 No Hanhua 2007 2010 Mr. Wu Aug. 25, Sep. 25, RMB22.89 Vice GM Male 40 2008 2010 0 0 No Xiaoqing (July-Dec) Mr. Peter Aug. 25, Sep. 25, 2008 2010 RMB 24.27 Anthony Vice GM Male 49 0 0 No (Aug-Dec) Sommer Mr. Qin Current Male 28 Dec. 17, Sep. 25, 0 0 0.00 No 10 Liang Board 2008 2010 Secretary Former Aug. Mr. Liu Sep. 25, RMB 15.31 Board Male 60 25, 0 0 (Jan-Sep) No Chengxiang 2007 Secretary 2008 Explanation: 1. From Sep. 2008 to Dec. 2008, the Chairman Mr. YEUNG Kwok Wei Richard also held the position as Secretary of the Board of Directors of the Company. 2. No director, supervisor or senior executive of the Company holds any Company share. 3. Mr. Claude Burckbuchler, the board director of the Company, is acting as Legal Representative in Alstom (China) Investment Co., Ltd, controlling shareholder of the Company; Ms. Liu Yi, the board director of the Company, is acting as CFO of Alstom (China) Investment Co., Ltd, controlling shareholder of the Company; The board director Mr. Xiang Rongwei is acting as Chairman of the Board in Wuhan Boiler Group Co., Ltd, which is a shareholder of the Company; Supervisor Mr. Liang Fei is acting as Legal Director in Alstom (China) Investment Co., Ltd, controlling shareholder of the Company; Supervisor Ms. Peng Hexiang is acting as Chairman of Trade Union , Member of CPC Committee as well as Director in Wuhan Boiler Group Co., Ltd. Other directors, supervisors and senior executives do not hold any position in shareholders. II. Background and working experience of directors, supervisors and senior executives in latest five years. Mr. YEUNG Kwok Wei Richard (Yang Guowei), Chairman of the Board of the Company, born in April, 1949, Australian Citizenship. A HKIE Follow, major in Electric Engineering and holder of MBA degree. He had worked for Hong Kong CLP Co., Ltd, BBC, ABB and ALSTOM with positions held from Projects Sales Manager to Senior Vice President. He ever held positions of Country Chief Representative and Region Vice President in China of AREVA T&D SA. He is currently Regional Director of International Networks of ALSTOM China in Hubei and Hong Kong. Mr. Richard Yeung neither holds shares of the Company nor has been punished by China Securities Regulatory Commission (“CSRC”), other relevant authorities or Stock Exchange. Ms. Liu Yi was born in Mar. 1969, Chinese nationality and holder of bachelor degree. After graduation from Water Transport Department of Shanghai Marine College, she worked as an Accountant and Internal Controlling Manager in Shell (China) Development Co., Ltd, Total (China) Investment Co., Ltd and BP (China) Holdings Limited. She is the Regional CFO of Alstom (China) Investment Co., Ltd (the controlling shareholder of the Company). Ms. Liu Yi neither holds shares of the Company nor has been punished by CSRC, other relevant authorities or Stock Exchange. Mr. Claude Burckbuchler, born on Oct. 8, 1949, French nationality, graduated from Ecole Centrale Paris, was an engineer. Since Oct 2007, Mr. Claude Burckbuchler formally has been acting as President of ALSTOM China and President of Alstom Power System in China. Before this, Mr. Claude Burckbuchler ever took several senior positions in ALSTOM including General Manager and President of Global Hydro-electric Power operation in China (from 1996 to 1998). In 2000, he was appointed to act as Global President of Mechanical & Electrical Department, then 11 acted as Strategic Consultant of Merger and Acquisition of Electric Power Department in ALSTOM. Before took part in ALSTOM, Mr. Claude Burckbuchler acted as General Manager of Marine Affairs in Coflexip Company, which was famous in field of petroleum and natural gas. Mr. Claude Burckbuchler neither holds shares of the Company nor has been punished by CSRC, other relevant authorities or Stock Exchange. Mr. Jean-Michel AUBERTIN was born in Feb. 1958, French nationality. Became an Aeronautical Engineer after graduation from university in 1980 and acquired an EMBA degree in 1991; Mr. Jean-Michel AUBERTIN was appointed as System Engineer in Matra Company of Lagardere Groupe, Vice President as well as Sales & Marketing Vice President in Business Department of MMS. After MMS and Dasa merger to form the European Aeronautic Defense & Space Company, he was promoted to President of Communication & Satellites Department, in charge of business integrating, restructuring and developing; Mr. AUBERTIN joined Alstom Group in Oct. 2003 as Senior Vice President of Global Sales and Marketing in Alstom Power System (a part of Alstom Group), and is now Senior Vice President in Alstom Global Energetic and Environmental System Group. Mr. Jean-Michel AUBERTIN neither holds shares of the Company nor has been punished by CSRC, other relevant authorities or Stock Exchange. Director Mr. Xiang Rongwei was born in Apr. 1953, Chinese nationality. As a holder of Bachelor Degree, he worked as Deputy Director and Director of Finance as well as Deputy General Accountant and General Accountant in Wuhan Boiler Factory, as Deputy Chairman of the Board, Deputy General Manager, and General Manager in Wuhan Boiler Group Co., Ltd., and as Director, Deputy General Manager, and General Manager in Wuhan Boiler Co., Ltd. He holds the position as Chairman of the Board of Wuhan Boiler Group Co., Ltd at present. Mr. Xiang Rongwei neither holds shares of the Company nor has been punished by CSRC, other relevant authorities or Stock Exchange. Independent Director Mr. Wang Haisu was born in Nov. 1954, Chinese nationality. He is a Doctor of Philosophy in Economics, Professor and Doctoral Advisor. Currently he holds the position as President of MBA College in Zhongnan University of Economics and Law and professional researcher in Property Research Center of Key Research Base for Humanities and Social Sciences under the Ministry of Education. His main research area covers industrial organization, reform of state-owned enterprises and assets appraisal. He also takes the positions of Vice Executive Director of Chinese Industrial Economic Association, Vice President of Hubei Industrial Economic Association, Director of China Appraisal Society, Vice President of Hubei Appraisal Society, consultant in Wuhan Association of Small and Medium Enterprises and member of Drafting Group of Standards for the Appraisal of Assets in China. He was elected as a member of Drafting Experts Group of National Standard for New-emerged Market by International Valuation Standards Council at the end of 2000. Mr. Wang Haisu neither holds shares of the Company, nor has any relationship with controlling shareholders or actual controllers, nor has been punished by CSRC, other relevant authorities or Stock Exchange. Independent Director Mr. André CHIENG was born in Nov. 1953, French nationality. He graduated from Ecole Polytechnique De Paris. With strong interest in Economics, 12 he once attended the National Economics Management and Statistics Institute and Institute Etudes Politiques de Paris. After he taught Economics in China for two years since 1978, he went back to France in 1980 and joined Louis-Dreyfus as General Manager of BRANBRA Co., which has long been engaged in trade to China. In 1988, the company changed its name into AEC ASITIQUE EUROPEENNE DE COMMERCE, and enlarged its business of consulting. In the same year, Mr. André CHIENG was appointed as Chairman of the Board of Directors and still holds the position now. Mr. André CHIENG went and settled down in Beijing since 2001. He also takes the positions of Vice President of Comité France Chine, politics & economy consultant of Hebei province and honorary member of China Council for Promotion of International Trade. Mr. André CHIENG neither holds shares of the Company, nor has any relationship with controlling shareholders or actual controllers, nor has been punished by CSRC, other relevant authorities or Stock Exchange. Independent Director Mr. Yang Xiongsheng was born in Feb 1960, Chinese nationality. He graduated from Dongbei University of Finance and Economics with a Doctor of Philosophy in Accountancy. Currently he holds positions as a Director, Professor and Doctoral Supervisor in Department of Accountancy of Nanjing University. His major research fields involve internal control, Basic Accounting Theory, finance management, management accounting. Professor Yang is also a Committee Member and Vice Secretary General of Accounting Society of China, Commissioner of China Internal Control Standards Committee under the Ministry of Finance, Consultant of accounting standards under the Ministry of Finance and Vice Chairman of Accounting Society of Jiangsu. Besides, he also serves in Hohai University, Nanjing University of Science and Technology, Anhui University of Finance & Economics, Anhui University of Technology, and Zhejiang Institute of Finance & Economics as adjunct professor. He is also Independent Director in Ninghu Expressway, Aerosun and Black Peony. Mr. Yang Xiongsheng neither holds shares of the Company, nor has any relationship with controlling shareholders or actual controllers, nor has been punished by CSRC, other relevant authorities or Stock Exchange. . Convener of the Supervisory Board Mr. Liang Fei was born on Apr. 23, 1963, Chinese nationality. He graduated from the Faculty of Law at Beijing University in 1985. Then he studied Legal Research at the Faculty of Law of Columbia University in 1989, and studied International Economic Law at the Faculty of Law of Beijing University as an on-the-job postgraduate during 1992 to1995. Once served as Legal Counsel for China Petro-Chemical International Company, Expert in China Laws and Regulations for Skadden Law Office, Mr. Liang Fei had also been Lawyer for Junhe Law Office, Director Lawyer and founding partner of Jingtian Law Office. Besides, he was Senior Legal Counsel of Motorola Co., Ltd, Chief Legal Counsel for Asia Info Co., Ltd., Vice-President and Chief Legal Counsel of Sparkice Co., Ltd., Law Officer of China and North Asia Laws and Regulations of Agilent Technologies and Senior Legal Counsel of Intel Company as well. He holds the position as Chief Law Officer in Alstom Company and member of China International Economic and Trade Arbitration Commission. Mr. Liang Fei neither holds shares of the Company, nor has been punished by CSRC, other relevant authorities or Stock Exchange. Supervisor Ms. Sun Tong was born on Jul. 2, 1970, Chinese nationality. From 1988 to 1992, she studied at Tianjin University and got a dual-degree (Enterprise Management 13 and English for science and Technology). She became an Assistant Lecturer at Tianjin University of Finance and Economics during 1992 and 1993 and worked at Public Relations Department of Management Committee of Tianjin Development Zone during 1993 and 1994. Later, she became an Administrative Manager of Finance in the joint company of China Petroleum and Chemical Industry and Honeywell International Co., Ltd, Business Operating and Controlling Manager of Equipment Department, Honeywell International (China area), and Manager of Honeywell International in South China District etc. from 1994 to 2000. During the period of 2002 and 2004, she studied at EMBA and then acted as Financial Manager of Tianjin ALSTOM Hydro Co., Ltd during 2001 and 2003. Now she holds the position as Deputy General Manager of Tianjin ALSTOM Hydro Co., Ltd. Ms. Sun Tong neither holds shares of the Company, nor has been punished by CSRC, other relevant authorities or Stock Exchange. Supervisor Ms. Peng Hexiang was born in May 1966, Chinese nationality. As a holder of Bachelor Degree, she now holds the positions as Chairman of Trade Union, Director and Member of the Party Committee of Wuhan Boiler Group Co., Ltd. She previously served as Director of the Office of Party Committee, Secretary of the Party Branch in Wuhan Boiler Co., Ltd, Secretary of the Party Branch in Processing Branch Factory, Director of the Office, Secretary of the Party Branch, and Vice Secretary of Party Committee in Wuhan Boiler Co. Ltd. Ms. Peng Hexiang neither holds shares of the Company nor has been punished by CSRC, other relevant authorities or Stock Exchange. General Manager Gérard VALLEE was born in Nov. 1954, French nationality. He graduated from ENSAM Ecole National Superieure Des Atrs et Metiers in Paris with Engineering Degree in 1977, and attended Ecole supérieure de commerce de Paris-Ecole des Affaire de Paris (ESCP-EAP) in 1996, as well as MBA project execution of senior management research in INSEAD in 2003. Once served as General Manager in ALSTOM Beizhong Power (Beijing) Co., Ltd. and Alstom Shanghai Transformer Co., Ltd., He also held positions as Chief Procurement Officer (CPO) in Beijing ALSTOM Engineering Consulting Co., Ltd. Besides, he once served as Manager of Purchasing Department, Manager of Nuclear Power Department, Manager of Nuclear Power Market Service and Contract Engineer of Nuclear Power Department in ALSTOM Energy System Co., Ltd. Mr. Gérard VALLEE neither holds shares of the Company nor has been punished by CSRC, other relevant authorities or Stock Exchange. Financial Director Mr. Philippe VERGNE was born in Mar. 1965, French nationality. He is a CPA (DECF), graduating from ESLSCA (Postgraduate School of Business Management). Mr. Vergne once held positions as Chief Financial Officer in ALSTOM Electricity Company, Chief Financial Officer of Business Division in ALSTOM Power Boiler Factory; Financial Auditor of Industrial Services Division in Siemens, Paris France; Principal of Control Division, Accounting Manager and Chief Business Officer in SNI. Mr. Philippe VERGNE neither holds shares of the Company nor has been punished by CSRC, other relevant authorities or Stock Exchange. Deputy General Manager Mr. Bai Xixin was born in Jan 1963, Chinese nationality. He is a Senior Engineer. He obtained his Bachelor Degree of Engineering from Huazhong University of Science and Technology with major of power thermal energy and 14 Master Degree from Huazhong University of Science and Technology with major in western economics management. He is currently Deputy General Manager and Chief Economist of the Company. He successively held positions of Deputy Director of Design Division of Wuhan Boiler Factory, Deputy Director of Planning & Sales Division and Foreign Trade Division and Vice Chief Accountant and Director of Planning & Sales Division and Director of Foreign Trade Division in the Company. Mr. Bai Xixin neither holds shares of the Company nor has been punished by CSRC, other relevant authorities or Stock Exchange. Deputy General Manager Mr. Jin Zhicheng was born in Oct. 1959, Chinese nationality. He is an economist, graduating from Jianghan University of Wuhan, majoring in Industrial Economics Management, and from Hubei Provincial Party School of the CPC with a major of Economics Management. In 1999, he studied MBA in the School of Economics and Management of Tsinghua University. He is currently the Deputy General Manager of the Company. He successively held positions of Factory Director Assistant as well as Deputy Factory Director of Pipe Branch of the Company and Factory Director of Processing Branch of the Company. Mr. Jin Zhicheng neither holds shares of the Company nor has been punished by CSRC, other relevant authorities or Stock Exchange. Deputy General Manager Mr. Pei Hanhua: He was born in Nov. 1959, Chinese nationality. He is an economist, graduating from Hubei Provincial Party School of the CPC with a bachelor degree majoring in Economics Management. He now is Deputy General Manager. He ever was Secretary of the Party Branch of Purchasing Division in the Company and Vice Chairman of Wuhan Safety Production Association, ever in charge of safety, health and environment of the Company. He ever took the positions of Factory Director Assistant, Deputy Factory Director and Factory Director of Steam Pressure Vessel Branch in the Company. Mr. Pei Hanhua neither holds shares of the Company nor has been punished by CSRC, other relevant authorities or Stock Exchange. Deputy General Manager Mr. Wu Xiaoqing was born in Oct. 1968, Chinese nationality. He graduated from Shanghai Jiaotong University, majoring in Energy. He previously held the positions of Purchasing Specialist of ABB Global Sourcing Shanghai Office, Sourcing Manager of 2nd period 2×900MW Boiler Project of ALSTOM Waigaoqiao Power Plant, Souring Manager of ALSTOM Power Energy Recovery System Business Department in China and Sourcing Manager of purchasing bulky cargos in Global Sourcing of ALSTOM energy and environmental protection systems. Mr. Wu Xiaoqing neither holds shares of the Company nor has been punished by CSRC, other relevant authorities or Stock Exchange. Deputy General Manager Mr. Peter Anthony Sommer was born in Jun. 1959, Australian nationality. Mr. Peter Anthony Sommer possesses a Bachelor degree of Engineering and a Master degree of Management. He successively served as Steam Turbine Operation Manager and Manager of Scheme on Design of Senior Engineering in Australian Lansfield, manager in charge of large-scale electric power projects in large trans-national companies Australian Environment and Energy as well as ALSTOM. Mr. Anthony Sommer neither holds shares of the Company nor has been punished by CSRC, other relevant authorities or Stock Exchange. 15 Current Secretary of the Board of Directors Mr. Qin Liang: He was born in Mar. 1980, Chinese nationality. He graduated from the East China University of Politics and Law with a L.L.B degree in Civil and Commercial Law and University of Durham with a L.L.M degree in European Union Law. Mr. Qin Liang now also holds the position of Legal Director in the Company. He ever held positions as Assistant to CEO and Legal Counsel in Co-Wealth Group, China Legal Manager of Pacific Media PLC, Special Assistant to CEO and Legal Counsel in Cathay Industrial Biotech Ltd. Mr. Qin Liang neither holds shares of the Company nor has been punished by CSRC, other relevant authorities or Stock Exchange. Previous Secretary of the Board of Directors Mr. Liu Chengxiang was born in Sep. 1948, Chinese nationality. He is a senior political work engineer. He graduated from China Central Radio and TV University with a major of Industrial Enterprise Management. He successively took the posts of Assistant to General Manger of Wuhan Boiler Group Co., Ltd, Deputy Director and Director of Division of Supervision Auditing in Wuhan Boiler Factory, Secretary of the Party in General Branch of Pipe Branch of Wuhan Boiler Co., Ltd and Principal of Assets Operation Department of Wuhan Boiler Group Co., Ltd. Besides, he once worked as Principal of Securities Department of the Wuhan Boiler Co., Ltd as well as Director and Secretary of the Board of the 3rd Board of Directors of the Wuhan Boiler Co., Ltd. On the Aug. 25, 2008, he resigned from the post of Board Secretary because of retirement. III. Annual remuneration of directors, supervisors and senior executives 1. Decision-making procedure of remuneration: remuneration of directors, supervisors and senior executives of the company is paid in accordance with the standards stipulated by the state labor ministry. Proposal on annual remuneration of directors, supervisors and senior executives was formulated by the Board of Directors in compliance with the evaluation system of the Company, which was implemented after reviewed and approved by Shareholders’ General Meeting. 2. The Company paid RMB 100,000 (before tax) to each Independent Director as allowance. Traveling and accommodation expenses incurred for attending the Board Meetings and Shareholders’ General Meetings will be reimbursed by the Company. IV. Changes of directors, supervisors and senior executives during the reporting period The Shareholders’ General Meeting 2008 was held on Jun. 19, 2008, in which reviewed and approved the Proposal about resignation of Mr. Alain Berger from the Board of Directors of the Company and Recommendation of a Candidate Director through accumulative voting, and elected Mr. Claude Burckbuchler as a board director of the Company. The 1st Extraordinary Shareholders’ General Meeting 2008 was held on Nov. 5, 2008, in which reviewed and approved the Proposal about Electing Mr. Xiang Rongwei as a Candidate Director through accumulative voting, and elected Mr. Xiang Rongwei as a board director of the Company. The Shareholders’ General Meeting 2008 was held on Jun. 19, 2008, in which reviewed and approved the Proposal about Resignation of Ms. Waser Raphaele Marie Aimee and Ms. Marie-José Donsion from the Supervisory Board of the Company and Recommendation of Candidate Supervisors through accumulative voting. Mr. Liang Fei and Ms. Sun Tong were elected as supervisors of the Company. The 8th Meeting of the 4th Board of Directors of the Company was held on Aug. 25, 16 2008, in which reviewed and approved the Proposal about Appointing two Senior Executives. Mr. Wu Xiaoqing and Mr. Peter Anthony Sommer were appointed as Deputy General Managers of the Company. The 11th Meeting of the 4th Board of Directors of the Company was held on Dec. 17, 2008, in which reviewed and approved the Proposal about Appointing Mr. Qin Liang as Secretary of the Board of Directors. Mr. Qin Liang was appointed as the Board Secretary of the Company. V. Employees As at the end of reporting period, the Company has a total number of 2,335 on-the-job staffs and 1,332 retired staffs. Details as follows: Specialty Composition: Items Number of person Proportion（%） Production Personnel 1,275 54.14% Sales Personnel 18 0.76% Technician 443 18.81% Financial Personnel 56 2.38% Administration Personnel 247 10.49% Other 316 13.42% Total 2,335 100% Education Background: Items Number of person Proportion (%) Undergraduate or above 336 14.27% 3-year regular college graduate 605 25.69% Senior high school (including technical 987 41.91% secondary school and technical school) Junior high school or lower 427 18.13% Total 2,335 100% 17 Section VI Corporate Governance I. Corporate governance structure of the Company Shareholders’ General Meeting Supervisory Board Board of Directors Strategy Committee Audit Committee Nomination Committee Compensation Committee Internal Audit Department Management Team II. Corporate governance in the reporting period The Board of Directors of the Company continuously improved its corporate governance and standardized the Company’s operation strictly according to the requirements of Company Law, Securities Law and other relevant laws and regulations. In the reporting period, by launching specific correction activities, the Company improved many aspects of governance and internal control system, revised the detailed working rules of each special committee of the Board of Directors, and continuously improved its corporate governance and normalized operation. The Board of Directors thinks that the actual situation of corporate governance of the Company is in compliance with the requirements of the Code of Corporate Governance for Listed Companies in China. 1. About shareholders and Shareholders’ Meeting: The Company convenes and holds Shareholders’ Meetings according to requirements of the Opinions on the Standardization of Shareholders Meeting of Listed Companies and the Rules for Procedure of the General Meeting of Shareholders of Listed Companies, the Company treats all shareholders equally, especially minority shareholders are insured to be equally treated and they can fully exercise their lawful rights. 2. About relationship between controlling shareholder and the Company: Controlling shareholder performed the legitimate right through Shareholders’ meeting and didn’t, directly and indirectly, intervene the Company’s decision-making and operation through other channels. The human resources, assets, finance, organizations and operations of the Company are independent of controlling shareholder. The Company and controlling shareholder maintain different financial accounts, independently undertake commercial liabilities and market risks. Related transactions between the Company and controlling shareholder are reasonable and fair, and decision-making procedures complied with the Rules. The controlling shareholder didn’t occupy any fund of the Company and the Company didn’t provide any guarantee to the controlling shareholder and its subsidiaries. 18 3. About directors and the Board of Directors: The Company elected and engaged directors strictly in accordance with Procedure on Director Election, the Company Law and the Articles of Association, ensuring that the director election is public, just, fair and independent. The Company ensured that the number and structure of directors accorded with provisions stipulated in the Law and statute, and the meeting of the Board of Directors was convened and held according to the Rules of Procedure for the Board of Directors. Members of the Board of Directors practiced and fulfilled their duty honestly, diligently and responsibly. The Board of Directors established special committees, each of which performed its own duty and improved the efficiency of the Board of Directors. 4. About Supervisors and Supervisory Board: The Company elected supervisors strictly in accordance with Procedure on Supervisor Election, the Company Law and the Articles of Association. The Company ensured that the number and structure of supervisors accorded with provisions stipulated in the Law. The Supervisory Board can inspect and supervise the legitimacy of activities of the Company finance, directors, senior executives and other managers, safeguarding the benefits and interests of shareholders. 5. About information disclosure and its transparency: Secretary of the Board of Directors was responsible for information disclosure and investor relationship management, including reception of visits and consultations from investors. Securities Times and Hong Kong Ta Kung Pao were designated by the Company as the newspapers for disclosing relevant information. According to law, regulation and requirements of the Articles of Association, the Company disclosed the information authentically, accurately, timely and completely to ensure all shareholders have equal opportunity to acquire information. III. Performance of Directors and Independent Directors The Company has three independent directors, which met the requirement of Guided Opinion on Establishing Independent Director System of Listed Companies promulgated by China Securities Regulatory Commission. The Independent Directors of the Company carefully fulfilled their duties, prudently reviewed and voted proposals submitted to all meetings of the Board and Shareholders’ Meetings and issued independent opinions, which made a positive effect on the reasonable decision-making process of the Board and the protection of the legitimate equity of shareholders. 1. Directors including Independent Directors attending the meeting of the Board: Times that Times Times of presence Times by Times should be of Successively Name Position held through Power of of present at the personal absent twice communication Attorney absence Board meeting presence YEUNG Chairman of Kwok Wei the Board of 7 7 0 0 0 No Richard Directors Ms. Liu Yi Director 7 7 0 0 0 No Claude Director 4 4 0 0 0 No Burckbuchler Mr. Jean-Michel Director 7 5 2 0 0 No AUBERTIN Mr. Xiang Director 1 1 0 0 0 No Rongwei 19 Mr. Wang Independent 7 6 1 0 0 No Haisu Director Mr. André Independent 7 6 1 0 0 No CHIENG Director Mr. Yang Independent 7 6 1 0 0 No Xiongsheng Director 2. Particulars about Independent Directors proposing different opinions on relevant items of the Company: During the reporting period, all independent directors proposed no different opinions on the relevant items of the Company. IV. Independence of assets, personnel, finance, organization and operations of the Company from controlling shareholder The Company is independent in personnel, finance, organization, operations from the controlling shareholder, ALSTOM (China) Investment Co., Ltd, and independently responsible for market responsibilities and risks. In Personnel, the Company established independent labor, personnel and salaries management systems. No senior executives possess any position in the companies of the controlling shareholder. In assets, the relationship regarding assets ownership between the Company and the controlling shareholder has been clearly defined and the controlling shareholder does not in possession of any assets, capital or other resources of the Company. In financing, the Company has its own independent accounting and finance department with perfect finance accounting system and finance management system. Decisions in finance are made according to the stringent requirements of accounting for listed companies, and the similar requirements have been applied to subsidiaries of the Company. The Company has its own independent bank account and its taxations are paid independently in compliance with legal requirements. In organization structure, the Company already established independent, integrated and effective operation system and responsibility of all organizations is clear. The establishment and operation of corporate governance of the Company was already implemented strictly in accordance with Articles of Association, which introduced Independent Director System and established four special committees under the Board. The production, operation and administration of the Company are completely independent from the controlling shareholder. The Company already established origination structure suitable for requirement of self-development. In operation, the Company has independent and integrated business and has capability to self-operate, independent purchase, sales, and production systems. The purchase, production, sales, or raw materials are all conducted through the independent system of the Company. There is no horizontal competition between the Company and the controlling shareholder in domestic market. V. Performance appraisal and stimulation mechanism for Senior Executives Appraisal and stimulation mechanism for Senior Executives of the Company made by the Board of Directors was based on the achievement of business target. According to annual operation target, the Company paid annual salary to senior executives according to individual performance review and other appraisal index such as operation performance, safety production, diligent and honest administration. VI. Particulars about the internal control of the Company Based on the Company’s self-characteristics, real situation and actual management 20 requirements, the Company formulated an internal control system covering every level and every section of production and operation activities in accordance with the PRC Company Law, the PRC Securities Law and other relevant laws, statutes and regulations. The system of internal control included the control of production and operation, finance management, information disclosure etc., which was continuously complemented, revised and perfected as well as put into practice stringently. 1. Opinion of the Board of Directors concerning self-assessment of internal control The current internal control system of the Company is in compliance with the relevant law and requirements set forth by securities supervision authorities, and it also satisfies the actual needs of Company operation. The management team has full awareness to enhance the system of internal control, and formed a positive environment as well as a good supervisory system for internal control. The current internal control system was well targeted, reasonably established, and finely practiced, which was well reflected in the internal control of the sales of production and money collection, purchase and payment of stocks and approval and reimbursement for Expense and Capital Expenditure. Besides, it exerted positive effects on key sections, important investments and important risks, ensuring normal operations in each department and safety of all assets of the Company. The Internal Control Self-assessment Report will be announced on April 27，2009 on the cninfo website http://www.cninfo.com.cn/, which is the designated website by the Company for disclosure of information. 2. Opinion of the Supervisory Board concerning Internal Control Self-assessment Report In accordance with relevant provisions stipulated by China Securities Regulatory Commission and Shenzhen Stock Exchange and basic principles of internal control, the Company improved the organization of internal control based on the reality of the Company. With an updated internal control system, the Company conducted normal internal-control activities, promoted smooth and healthy operation of the Company and ensured the plausibility and legality of internal control. The internal control system enabled better protection and safety of the assets of the Company. The self-assessment of the Board of Directors on the Company’s internal control system, truly and objectively, reflected the actual situation of the internal control of the Company. 3. Opinion of Independent Directors concerning Internal Control Self-assessment Report In the reporting period, the Board of Directors revised, examined and approved a series of new management rules of the Company. With a fair and sound internal control system of the Company, the key improvement activities concerning internal control were launched stringently according to various rules of the Company. The internal control on management of subsidiaries, related transactions, external guarantee and information disclosure was strict, sufficient and effective, which helped to ensure normal operation in business and management of the Company. The self-assessment of the Board of Directors on the internal control was in accordance with actual situation of the internal control of the Company. VII. Verification of appraisal opinion from auditor concerning self-assessment of internal control of the Company During annual audit 2008, the auditor did not express verification of appraisal opinion on the self-assessment of internal control of the Company. 21 VIII. Carrying out a Special Campaign to Strengthen the Corporate Governance of the Company The Company has established a self-examination group with Mr. YEUNG Kwok Wei, the Chairman of the Board of Directors, as the head, measuring up to the requirement of Notice on Further Promotion of a Special Campaign to Strengthen the Corporate Governance in 2008 by China Securities Regulatory Commission (Document Number: No.116 [2008]) and Notice on Further Promotion of a Special Campaign to Strengthen the Corporate Governance by Hubei Securities Regulatory Commission as well as the spirit of the Working Conference on Enhancing Standard Operation of Listed Companies held by Hubei Securities Commission on Jun. 27th, 2008. Besides, the Company distributed related study materials to Directors, Supervisors and Senior Executives of the Company, mapped out related working plan and launched an activity focused on full recognition, explicit responsibility and strict implementation of measures, self-examination, and rectification to unify and improve the general understanding over this issue. The Board of Directors disclosed the Explanation about the Corrections and Improvements Activities of the Company on Corporate Governance in Securities Times and Ta Kung Pao on July 26, 2008. 22 Section VII. Brief Introduction of Shareholders’ General Meeting I. Notification, convening and holding of the Shareholders’ General Meeting (1) Annual Shareholders’ General Meeting The Company held Annual Shareholders’ General Meeting 2007 on Jun 19, 2008, and the Meeting Resolution was published on Securities Times and Ta Kung Pao dated Jun 20, 2008. Annual Report 2007 and Preplan on Profit Distribution 2007 etc were reviewed and approved in the meeting. (2) Extraordinary Shareholders’ Meeting The Company held the first Extraordinary Shareholders’ Meeting 2008 on Nov. 5, 2008, and the Meeting Resolution was published on Securities Times and Ta Kung Pao dated Nov 6, 2008. Resolution on Entrusted Shareholder Loan from ALSTOM (China) Investment Co., Ltd through a domestic bank in China and Resolution on Electing Mr. Xiang Rongwei as a candidate Board Director were reviewed and approved in the meeting. 23 Section VIII. Board of Directors Report I. Discussion and analysis of operation results during the reporting period The year 2008 was the first year after the Company’s being acquired and restructured. Due to the Company’s plan to relocate its production facilities to a new factory in the middle of 2009, the Company’s production capacity in 2008 showed a decrease compared to 2007. With the radical changes in the domestic and international economic situation, the new management team of the Company smoothly executed the tasks of the four priorities planned at the beginning of 2008. 1) to increase the intake of profitable orders; 2) to improve the project management; 3) to optimize our cost base; 4) to launch a program “it is all about people” and well arrangements of all technical trainings and Transfer of Technology. In view of the decrease of sales revenue, the rising assets impairment loss caused by the further decrease of gross profit of the orders on hand, and the increasing financial costs as a result of increased borrowings, in 2008, the Board issued several profit warnings in succession. During the reporting period, the Company has achieved a total operations revenue amounting to RMB 1,121,071,252.12, a decrease of 36.68 % compared to last year; a total profit amounting to RMB -372,568,353.42, 28.58 % down from the previous year; a net profit attributable to shareholders reaching RMB -353,934,337.61, a reduction of 26.35 % over last year. II. Operation of the Company 1. Scope of operations and current status The Company is engaged in the development, production and sales of power station boilers, special boilers, desulfurization equipments, other pressure vessels and auxiliary equipments. Distribution of the main operations classified according to industry and products: Unit: (RMB) Yuan Distribution of the main operations classified according to industry Increase/decre Increase/decre Increase/decreas ase proportion ase proportion e proportion of Industry Operating Operating Cost Operat of operating of operating operating profit or Revenue ing revenue cost compared rate compared products profit compared with with the last with the last Rate the last year year (%) year (%) (%) Machinery 1,121,071,252.12 1,113,022,567.22 0.72% -36.68% -40.71% 6.75% Distribution of the main operations classified according to products Boiler 1,121,071,252.12 1,113,022,567.22 0.72% -36.68% -40.71% 6.75% Note: All the products of the Company, providing specialized equipments for energy and environmental industries, belong to the machine manufacturing industry. Main operation classified by region Unit: (RMB) Yuan Region Operating revenue Increase/decrease of operating revenue over last year (%) 24 South China 474,718,568.79 3.01% North China 646,352,683.33 -50.64% 2. Major suppliers and customers The total purchase from the top five suppliers for the year 2008 was RMB 536.81 million, accounting for 32.13% of the total annual purchase of the Company; total sales amount from the top five customers was RMB 740.59 million, consisting of 66.06% of the total sales of the Company. 3. Changes of Company’s assets, liabilities and expenses during the reporting period Unit: (RMB) Yuan 31 Dec. 2008 31 Dec. 2007 Increase/decrease of proportion in Items Proportion Proportion in total assets Amount Amount in total total assets assets Monetary capital 47,867,354.63 1.67% 171,765,248.14 6.86% -75.67% Accounts receivable 953,598,124.44 33.25% 782,963,441.98 31.00% 7.26% Inventories 918,505,849.66 32.03% 1,011,410,161.15 40.37% -20.67% 1,924,000,000.0 67.09% 115.65% 779,400,000.00 31.11% Short-term loan 0 Notes payable 433,649,225.98 15.12% 719,840,009.40 28.73% -47.37% Accounts payable 532,731,198.18 18.58% 455,383,537.42 18.18% 2.18% Items Y2008 Y2007 Increase/decrease Selling expense 6,198,590.04 29,866,560.96 -79.25% Administration expense 115,279,632.30 130,098,858.36 -11.39% Financial expense 96,508,269.91 64,585,424.10 49.43% Income Tax -14,895,591.36 -43,430,777.93 -65.70% Note: Reasons of change in the financial indexes: In the reporting period, the decrease of Monetary Capital was mainly due to the improvement of cash management and the release of pledged cash. In the reporting period, the decrease of inventory was mainly due to the decrease of in-progress projects; In the reporting period, the increase of short-term loan was mainly resulted from the increase of shareholder’s loan. In the reporting period, the decrease of notes payable was mainly due to the settlement of the mature notes; In the reporting period, the decrease of selling expenses was mainly due to the decrease of order intake and related expenses. In the reporting period, the increase of financial expenses was mainly caused by the increase of bank loans; 25 The decrease of corporate income tax was mainly due to less deductible temporary difference for tax deferred assets. 4. Measurement of fair value in the reporting period Measurement of fair value was in accordance with the stipulated accounting standards. No deviation in the reporting period. 5. Change of the Company’s cash flow position during the reporting period Unit: (RMB) Yuan Items Y2008 Y2007 Increase/decrease proportion (%) Cash flow from operating activities Cash inflow 1,120,815,165.76 2,622,628,814.86 -57.26% Cash outflow 1,950,404,963.56 2,712,562,864.43 -28.10% Cash flow net amount from operating activities -829,589,797.80 -89,934,049.57 -822.44% Cash flow from investment activities Cash inflow 83,252,823.79 83,068,843.81 0.22% Cash outflow 373,774,884.68 47,096,952.24 693.63% Cash flow net amount from investment activities -290,522,060.89 35,971,891.57 -907.64% Cash flow from fund-raising activities Cash inflow 2,640,000,000.00 961,400,000.00 174.60% Cash outflow 1,563,671,349.39 929,197,090.77 68.28% Cash flow net amount from fund-raising activities 1,076,328,650.61 32,202,909.23 3,242.33% Note: Reasons of change in the financial indexes: In the reporting period, the decrease of cash inflow from operating activities was mainly resulted from the decrease of revenue; The increase of cash outflow from investment activities was mainly caused by the investment on the new plant construction; In the reporting period, the increase of cash inflow from financing activities was mainly due to the increase of shareholder’s loan; In the reporting period, the increase of cash outflow from financing activities was mainly due to paying off the mature bank loan. 6. The operating results of holding subsidiaries and joint stock subsidiaries At the end of the reporting period, the Company had two subsidiaries: Wuhan Lanxiang Energy & Environmental Protection Technologies Inc. (hereinafter referred to as Lanxiang Company) and Wuhan Boiler Boyu Industrial Co., Ltd. (hereinafter referred to as Boyu Company). The general operating results of the said subsidiaries were as follows: Lanxiang Company Lanxiang Company was established on 4 Jun. 2002, with a registered capital of RMB 20 million of which Wuhan Boiler Company Limited holds 95% of total equity and the registration code of Lanxiang Company is 420100000094025. The business scope includes: R&D, design, consultation and technology services related to boilers, energy 26 & environmental protection products, steel structure, thermal energy-related products and their auxiliary equipments; marketing of products developed; energy project (non-land construction projects) contracting and technical service (special-purpose projects subject to governmental approval). In the reporting period, Lanxiang generated RMB 35.33 million revenue and RMB1.89million net profit. At the 8th meeting of the 4th Board of Directors of the Company on Aug 25, 2008, the proposal on acquiring 25% equity of Lanxiang Company was examined and approved. And details of the acquisition were disclosed in Securities Times and Ta Kung Pao on Aug 28, 2008, as “Announcement of Resolutions of the 8th meeting of the 4th Board of Directors of Wuhan Boiler Company Limited” and “Announcement about Wuhan Boiler Company Limited’s Acquiring 25% Equity of its Controlling Subsidiary - Wuhan Lanxiang Energy & Environmental Protection Technologies Inc.” Examined and approved by Wuhan Administrative Bureau for Industry and Commerce, the Company completed the transfer procedures of the acquisition on 16 Jan. 2009. Boyu Company Boyu Company was established on 30 Sep. 1998 with its registration code of 4201001101773. Its registered capital is RMB 19.115 million. And its business scope includes: product design, manufacturing and packaging of mechanical & electrical products, processing of metal structure, product design and production of mould & model, production of various high- and middle-pressure valve roughcast, cast steel, cast iron and non-ferrous metal cast. In the reporting period, Boyu Company generated operation revenue of RMB15.80 million and a net profit of RMB-1.80 million. At the 8th meeting of the 4th Board of Directors of the Company on 25 Aug. 2008, the proposal to terminate and liquidate Boyu Company was examined and approved, whose details were disclosed as “Announcement of Resolutions of the 8th meeting of the 4th Board of Directors of Wuhan Boiler Company Limited” in Securities Times and Ta Kung Pao on 28 Aug. 2008. Up to now, the termination and liquidation of Boyu Company is still in progress. The Company had no other subsidiaries, share holding and joint ventures. III. Future outlook of the Company 1. Analysis on the industrial development in 2009: Broken out at the end of 2008, the international financial crisis has been affecting the global economic situation so rapidly, adversely and widely that it is beyond the Company’s expectation. Along with the growing of the crisis, it would have a greater impact on China’s economic development, including the development of the power industry. The demand in the domestic power market is slackening and the number of projects is experiencing a significant decrease. According to domestic industrial information, the Chinese power-plant boiler industry will confront an unprecedented “cold spell” in the near future. As a result, the Company is predicted to encounter a harsher market environment and more difficulties to acquire orders in 2009. 2. Strategy for future development Investment into the infrastructure construction subject to environmental protection is part of the economic stimulus package of RMB 4 trillion put forward by the Chinese government, which means a favorable investment environment and a huge business opportunity for ALSTOM. ALSTOM possesses the world-advanced AGVTM rail 27 transport technology and provides integrated power plant solutions for a variety of energy sources, including coal, hydro, natural gas, nuclear and wind. With ALSTOM as a platform, the Company will look for opportunities to move up to a new level of development. In order to further improve the manufacturing technology level of boilers, the Company is currently investing a total of RMB 850 million in building a new plant. With the introduction of world-class supercritical and ultra-supercritical boiler technology from ALSTOM, the Company will be able to provide products which are environmental protection, high-efficient and highly adaptable to market needs. Consequently, the performance of the Company will be improved to a great extent, making it one of the world leaders in terms of boiler engineering design, manufacturing and finished products. It is also expected to be one of ALSTOM’s major boiler manufacturing bases worldwide and the sole base in China, as well as one of the most advanced boiler manufacturers in Asia and the world. 3. Operational strategy for the year 2009 With many difficulties and challenges ahead in 2009, the management team will keep alert to the changes of domestic and international markets and the price changes of cost elements, and make great efforts to improve the Company’s performance by focusing on the 5 key tasks as follows: 1) to fully study the international and domestic situation, further expand the market, and increase the intake of profitable orders to minimize the impact of financial crisis on the Company’s performance; 2) to improve project management by strengthening risk analysis and control of projects; 3) to optimize the cost base and improve the efficiency and profitability; 4) to optimize the organizational set-up and staff allocation in accordance with the relocation plan and the actual production capacity so that the operational efficiency can be greatly improved; 5) to enhance technical training and technology transfer training to prepare for the future development of the Company. 4. Major risks and solutions According to market forecast, 2009 will be a hard year for the power plant boiler market, which may bring the Company to a potential risk of decrease of market shares. In face of the international financial crisis and the new market risks, the Company will adopt an active attitude by maintaining the current market shares and then expand the market with cost and technology advantage. Considering the great influence from the price fluctuation of raw material, the Company will continue to strengthen the rated consumption system of raw materials, maintain a reasonable stock, follow closely the price trends of raw materials and adopt various purchasing strategies. Meanwhile, the Company will also continue to maintain a good relationship with the main suppliers of raw materials and sign continuing contracts with them to ensure the stability of material supply and material price. IV. Investment in the reporting period 1. In the reporting period, the Company had not raised fund through share offering or the application of fund from previous share offering. 2. In the reporting period, the Company had not raised fund through share offering for other investments. V. Changes in accounting policies and accounting estimates and their impact 28 In the reporting period, there were no changes in accounting policies and accounting estimates in the Company. VI. Routine work of the Board of Directors 1. Convening, resolutions and information disclosure In the reporting period, the Board of Directors held 7 meetings, and the detailed information regarding meeting, convening procedure and information disclosure are as follows: (1) On Apr. 21, 2008, the 5th meeting of the 4th Board of Directors was held in the meeting room of Ramada Plaza Pudong Shanghai, and the relevant public notice on the resolutions of this meeting was published on Securities Times and Ta Kung Pao dated Apr. 25, 2008. (2) On Apr. 21, 2008, the 6h meeting of the 4th Board of Directors was held in the meeting room of Ramada Plaza Pudong Shanghai, and the relevant public notice on the resolutions of this meeting was published on Securities Times and Ta Kung Pao dated Apr. 29, 2008. (3) On Jun. 3, 2008, the 7th meeting of the 4th Board of Directors was held in the meeting room of the Company, and the relevant public notice on the resolutions of this meeting was published on Securities Times and Ta Kung Pao dated Jun. 4, 2008. (4) On Aug. 25, 2008, the 8th meeting of the 4th Board of Directors was held in the 1st meeting room of the Company and the relevant public notice on the resolutions of this meeting was published on Securities Times and Ta Kung Pao dated Aug. 28, 2008. (5) On Oct. 15, 2008, the 9th meeting of the 4th Board of Directors was held in the Company, and the relevant public notice on the resolutions of this meeting was published on Securities Times and Ta Kung Pao dated Oct. 18, 2008. (6) On Oct. 27, 2008, the 10th meeting of the 4th Board of Directors was held in the meeting room of the Company, and the relevant public notice on the resolutions of this meeting was published on Securities Times and Ta Kung Pao dated Oct. 30, 2008. (7) On Dec. 17, 2008, the 11th meeting of the 4th Board of Directors was held in the meeting room of the Company, and the relevant public notice on the resolutions of this meeting was published on Securities Times and Ta Kung Pao dated Dec. 19, 2008. 2. Execution of resolutions of Shareholders’ General Meeting by the Board In the reporting period, the Board of Directors, with resolutions of and authorization from the Shareholders’ General Meeting, had conscientiously executed the resolutions made at the Shareholders’ General Meeting in accordance with applicable laws and regulations. And neither profit distribution nor capitalization of public reserves was conducted in the year 2007. 3. Performance of the Audit Committee of the Board (1) The review opinion on the financial statements issued by the Company before auditing by Wuhan Zhonghuan Certified Public Accountants Co. Ltd. Board of Directors of the Company: We have reviewed the financial statements submitted by Financial Department of the 29 Company date 13 Jan. 2009, which comprise the balance sheet as at December 31 2008, the income statement, the cash flow statement, the statement of change in owners’ equity for the year then ended, as well as the notes to the financial statements. We focused on the truth and completeness of the financial information provided and their adherence to the New Accounting Standard for Business Enterprises and the related financial system of the Company. Based on our inquiry with relevant financial personnel and management staff about the computational procedures of financial information, we believe that: all the transactions of the Company were fully recorded; the accounting policies and accounting estimates chosen were suitable and reasonable. Since there is still a time gap from this preliminary review to the issuance of the first draft of the auditor’s report, we reminded the Finance Department of the Company to strictly follow the New Accounting Standard for Business Enterprises on the treatment of events after balance sheet date to ensure the truth, fairness and completeness of the Financial Statements. Audit Committee of the Board of Directors 13 Jan. 2009 (2) The review opinion on the financial statements of the Company after the preliminary audit opinion issued by Wuhan Zhonghuan Certified Public Accountants Ltd. Board of Directors of the Company: We have reviewed the preliminary audit opinion issued by Wuhan Zhonghuan Certified Public Accountants Ltd and the financial statements submitted by the Company, which comprise the balance sheet as at December 31 2008, the income statement, the cash flow statement, the statement of change in owners’ equity for the year then ended, as well as the notes to the financial statements. Through further reviewing the details of the accounts records and vouchers, we maintained our original statement that: in our opinion, the financial statements complies with the New Accounting Standard for Business Enterprises and the related financial system of the Company, and present fairly in all material respects the financial position of the Company as of Dec 31, 2008, as well as the operating results and its cash flows for the year then ended. Audit Committee of the Board of Directors Apr. 15, 2009 (3) The summary report of the audit work performed by Wuhan Zhonghuan Certified Public Accountants Ltd. Board of Directors of the Company: In accordance with the audit plan of the Company, 6 auditors from Wuhan Zhonghuan Certified Public Accountants Ltd. performed the audit of the 2008 financial statements. The pre-audit communication commenced on 13 Jan. 2009 and the formal audit on 19 Jan. 2009. The leader of the audit team conducted effective communication with the Company’s relevant financial personnel, management personnel and members of the Audit Committee on the subject of consolidation of the Company’s financial statements and application of the New Accounting Standards for Business Enterprises. Such in-depth communication provide the auditors with an adequate understanding of the financial position and other operations of the Company, which provided the foundation for Wuhan Zhonghuan Certified Public Accountants Ltd. to draw a fair 30 audit conclusion. During the audit, the Audit Committee focused on the following questions when communicating with the auditors: 1) Whether all the transactions were recorded and reported fully, truly and fairly; 2) Whether all the financial reports were produced in accordance with the New Accounting Standard for Business Enterprises and the requirements of the securities regulatory authorities; 3) Whether the internal accounting control system of the Company was adequately implemented; 4) Whether all departments of the Company fully cooperated with the auditors in providing the information required. The auditors of Wuhan Zhonghuan Certified Public Accountants Ltd. gave positive replies concerning the aforesaid questions and issued a standard unqualified auditor’s report on 22 Apr. 2009. We hold the opinion that: with the excellent professional skills and reasonable personnel allocation, the auditors performing the 2008 annual auditing concluded their work in strict compliance with the Independent Auditing Criteria for Chinese Registered Accountants; the auditor’s report issued presented a true and fair reflection of the Company’s financial position, operating results and cash flows position for the year then ended, and the audit conclusion was in compliance with the Company’s actual situation. Audit Committee of the Board of Directors April 22, 2009 (4) Resolution on re-engagement of Wuhan Zhonghuan Certified Public Accountants Ltd. as auditor for the year 2009 Wuhan Zhonghuan Certified Public Accountants Ltd. had been serving as the Company’s annual auditor since the year 1998. And it performed competently and diligently during the 2008 annual auditing. Therefore, the Audit Committee hereby proposes to renew the engagement of Wuhan Zhonghuan Certified Public Accountants Ltd. as the annual auditor for the year 2009, with an auditing fee of RMB 750 thousand. The above resolution shall be submitted to the Board of Directors of the Company for examination and the Annual Shareholders’ General Meeting 2008 for examination and approval. Audit Committee of the Board of Directors April 22, 2009 4. Duty performance of the Remuneration and Appraisal Committee of the Board The Remuneration and Appraisal Committee reviewed the remuneration of directors, supervisors and senior executives disclosed in the Annual Report 2008 of the Company, with the following opinion: In our opinion, the current C&B system applied in the Company was set up according to the stipulated decision-making process. The actual distribution of remunerations for directors, supervisors and senior executives and the corresponding amount disclosed in the Annual Report 2008 are true and correct. 31 Remuneration and Appraisal Committee of the Board April 22, 2009 VII. Preplan of profit distribution and capital reserves for the year 2008 As audited by Wuhan Zhonghuan Certified Public Accountants Ltd., the Company generated a net profit attributable to shareholders of the Company amounting to RMB -353,934,337.61 in 2008. Neither profit distribution nor capitalization of public reserves was conducted in the year 2008. The aforesaid preplan shall be submitted to the Company’s Annual Shareholders’ General Meeting 2008 for examination and approval. Particulars about the bonus distribution of the Company over the past three years Unit: RMB Yuan Net profit attributable Ratio in net profit Amount of cash bonus to owners of parent attributable to owners of (tax included) company under the parent company under the consolidated statement consolidated statement 2007 0.00 -480,602,218.59 0.00% 2006 5,940,000.00 12,748,931.97 46.59% 2005 10,395,000.00 30,420,946.16 34.17% VIII. Other information disclosed (1) Securities Times and Ta Kung Pao were designated by the Company as the newspapers for disclosing the relevant information in 2008, which remained unchanged. (2) Special explanation by Wuhan Zhonghuan Certified Public Accountants Ltd. on the funds occupation by the controlling shareholder or other related parties The full text of the Special Explanation on the Funds Occupation by the controlling Shareholder and Other Related Parties of Wuhan Boiler Company Limited issued by Wuhan Zhonghuan Certified Public Accountants Ltd. had been published on the websites of Shenzhen Stock Exchange and www.cninfo.com.cn. (3) Special explanations and independent opinions on the accumulated external guarantees and the current period external guarantees given by the independent directors of the Company The independent directors believed that the Company had strictly controlled external guarantee issues, and no guarantees had been provided for shareholders, holding subsidiaries of shareholders, affiliated enterprises of shareholders, or other related parties that the Company held by less than 50 percent equity, any non-legal person units or any individuals. In the reporting period, the Company didn’t provide any guarantees to any external entity in any form. 32 Section IX Report of the Supervisory Board I. Work of the Supervisory Board in the reporting period: In 2008, the Company’s Supervisory Board performed its responsibilities of supervision in accordance with the Company Law, Securities Law and the Articles of Association of the Company and on behalf of all shareholders. There were five Supervisory Board meetings held during the reporting period, examining the Annual Report and the Interim Report submitted by the Company, supervising the execution of board resolutions by the Board of Directors, and ensuring that the operations as performed by Board of Directors and the management team are in accordance with laws and regulations. In the reporting period, the Supervisory Board held meeting 5 times, with their respective meeting name, convening, resolutions and information disclosure as follows: (1) On 21 Apr. 2008, the 3rd Meeting of the 4th Supervisory Board was held at the meeting room of the Ramada Plaza Pudong Shanghai, and the resolutions approved as below: 1. Examined and approved the Report of Supervisory Board 2007 with 3 approval votes, 0 against vote, 0 abstention vote. 2. Examined and approved the Annual Report 2007 and its Summary Report with 3 approval votes, 0 against vote, 0 abstention vote. 3. Examined and approved the Auditors’ Report 2007 with 3 approval votes, 0 against vote, 0 abstention vote. 4. Supervisors present at the meeting believed that the procedures of the following proposals were legal, i.e. the Profit Distribution Preplan 2007 of the Company, the proposal on Renew Engagement of Wuhan Zhonghuan Certified Public Accountants Ltd. as the auditing agency for the year 2008 and the remunerations for them, the proposal on the Annual Remunerations for the Directors, Supervisors and Senior Executives for the year 2007, the proposal on the Execution of Daily Related Transaction 2007 and Daily Related Transaction Estimate 2008, the Work Detailed Rules of the Special Committee of the Board, the Working Rules for Independent Directors in Preparation of the Annual Report, the Annual Financial Report Auditing Work System of the Audit Committee, the proposal on Approval on Resignation of Mr. Alain Berger from Director and Additionally Electing Director Candidate, the proposal on Approval on the Resignation of Mr. Hua Lixin from Deputy General Manager of the Company and the proposal on the Convening of the Shareholders’ General Meeting 2007. The Supervisory Board also believed that the Board of Directors of the Company had performed their duties honestly and diligently, and that while making the aforesaid resolutions, there existed no disobedience against relevant laws, regulations, normative documents or the Articles of Association of the Company, which accorded with the overall interests of the shareholders and the Company. The public notices of the resolutions of this meeting were published in Securities Times and Ta Kung Pao on 25 Apr. 2008. (2) On 21 Apr. 2008, the 4th Meeting of the 4th Supervisory Committee was held at the meeting room of Ramada Plaza Pudong Shanghai, at which the First Quarterly Report 2008 was examined and approved with 3 approval votes, 0 against vote, 0 abstention vote. The public notice of the resolution of this meeting was published in Securities Times 33 and Ta Kung Pao on 29 Apr. 2008. (3) On 28 May 2008, the 5th Meeting of the 4th Supervisory Board was held at the meeting room of the Company, at which the proposal on Resignation of Ms. Waser Raphaele and Ms. Marie-José Donsion from Supervisors and Additionally Electing Supervisor Candidate was examined and approved with 3 approval votes, 0 against vote, 0 abstention vote. The public notice of the resolution of this meeting was published in Securities Times and Ta Kung Pao on 29 May 2008. (4) On 25 Aug. 2008, the 6th Meeting of the 4th Supervisory Board was held at the meeting room of the Company, at which the Interim Report 2008 was examined and approved with 3 approval votes, 0 against vote, 0 abstention vote. The public notice of the resolution of this meeting was published in Securities Times and Ta Kung Pao on 28 Aug. 2008. (5) On 27 Oct. 2008, the 7th meeting of the 4th Supervisory Board was held at the meeting room of the Company, at which the Third Quarterly Report 2008 was examined and approved with 3 approval votes, 0 against vote, 0 abstention vote. The public notice of the resolution of this meeting was published in Securities Times and Ta Kung Pao on 30 Oct. 2008. Ⅱ. Independent opinions expressed by the Supervisory Board on the following issues in the reporting period: (1) Operation of the Company In the reporting period, in accordance with relevant laws and regulations, the Supervisory Board had conducted supervision over the convening procedures of and resolutions made at the shareholders’ general meetings and the Board meetings, the implementation by the Board of the various resolutions made at the shareholders’ general meetings, the duty performance of the Company’s senior executives and management system of the Company, etc. The Supervisory Board believed that the Board of Directors of the Company strictly conforms to the Company Law, Securities Law, Listing Rules, the Articles of Association of the Company and other relevant rules and regulations, fulfill their duties in standardization in 2008, and that the Board had performed their duties carefully and made scientific and reasonable operation decisions. The internal management and internal control system were further improved and the internal control mechanism was established. (2) Financial status of the Company In the reporting period, the Supervisory Board conducted periodic inspection into the financial system and the financial status of the Company, and it believed that the Financial Report 2008 could truly reflect the financial status and operating results of the Company. The Supervisory Board also believed that the auditing opinions given by Wuhan Zhonghuan Certified Public Accountants Ltd. had truly, objectively and fairly reflected the financial status and the operating results for the year 2008 without false records, misleading statements or material omissions. (3) Use of raised capital The Company had not raised any capital in the recent three years (including this report period). 34 (4) Related transactions of assets purchase or sales The Company had no related transactions such as assets purchase or sales in the reporting period. (5) Inspection of related transactions The prices of the related transactions of the Company, in the reporting period, were fair and reasonable, and had done no harm to the interests of the Company. The duty of the disclosure of information was fulfilled timely. 35 Section X. Significant Events I. Significant lawsuits and arbitrations The Company had no significant lawsuits or arbitrations in the reporting period. II. Significant purchase or sales of assets and mergers During the reporting period, the Company had no significant events such as assets purchase, assets sales or mergers. Ⅲ. Related transactions (1) Related transactions on purchasing and selling goods and offering and receiving service: Unit: (RMB) Yuan 2008 2007 Details of Rule of price Related party Type of transaction Proportion Proportion transaction setting Amount Amount (%) (%) Wuhan Boiler Group Raw material Valve Market price 11,212,422.22 0.67% 39,183,500.00 2.81% Valve Co., Ltd. purchasing ALSTOM Technical Raw material Services (Shanghai) Air prehearter Market price 1,298,000.00 0.08% purchasing Co., Ltd. Wuhan Boiler Group Sales material Market price 104,269.23 0.01% 2,683,800.00 0.15% Valve Co., Ltd. Wuhan Boiler Group Boiler Sales Market price 9,102,631.01 0.82% 11,602,900.00 0.66% Co., Ltd. products Wuhan Special Boiler Special boiler Complete Equipment Sales Market price 80,732,431.77 7.29% 64,084,800.00 3.62% products Engineering Co.,Ltd. Wuhan Boiler Group provides Transportatio Market price 70,975,019.54 100% 71,258,500.00 100% Yuntong Co., Ltd. transportation service n service (2) Lease Unit: (RMB) Yuan Lessor Lessee Leased Lease Starting Ending yield Recognized rule influence asset amount date date Increase Wuhan Boiler Wuhan Sept.1, 30 Jun. administration Group Co., Boiler Co., Land -2,234,103.45 contract 2007 2009 expense in current Ltd. Ltd. fiscal year Increase Wuhan Boiler Wuhan Office Jan.1, Dec.31, administration Group Co., Boiler Co., -840,238.08 contract Building 2007 2008 expense in current Ltd. Ltd. fiscal year Increase Wuhan Boiler Wuhan Workshop Jan.1, Dec.31, administration Group Co., Boiler Co., and -865,516.80 contract 2007 2008 expense in current Ltd. Ltd. Warehouse fiscal year (3) Other related transactions: Amount due from/to related parties Unit: (RMB) Yuan Prepayments Item Closing balance ALSTOM Technical Service (Shanghai) Co., Ltd 1,298,000.00 2008 2007 Trade receivables Wuhan Boiler (Group) Co., Ltd. Other receivables: 44,119,317.50 40,641,647.50 Wuhan Special Boiler Complete Boiler (Group) Co., Ltd. Equipment Engineering Co.,Ltd. 33,657,132.81 5,407,948.32 9,597,700.00 36 Wuhan Boiler (Group) Valve Co., Ltd. 113,589.71 4,451.27 Trade payables: Wuhan Boiler (Group) Yuntong Co., Ltd. 16,735,786.80 5,938,361.24 Wuhan Boiler (Group) Valve Co., Ltd. 5,399,315.70 5,637,574.14 Wuhan Special Boiler Complete Equipment Engineering Co.,Ltd. 6,116,800.00 23,909,060.08 Alstom Power Boiler GmbH 683,460.00 6,200,461.02 Advanced from customers Wuhan Boiler (Group) Co., Ltd. 7,490,430.00 Wuhan Special Boiler Complete Equipment Engineering Co.,Ltd. 19,917,800.00 Other payables: Wuhan Boiler (Group) Yuntong Co., Ltd. 20,000.00 Wuhan Boiler (Group) Co., Ltd. 11,499,926.80 7,392,933.79 (4)Alstom (China) Investment Co., Ltd provided shareholder loan to Wuhan Boiler Co., Ltd. The amount reached RMB 970,000,000.00 with a 10% down floating of benchmark loan rate. (5) In this fiscal year, the total amount of salary of directors, supervisors and senior executives is RMB 3,013,500.00. IV. Significant contracts and their implement (1) In the reporting period, there were no such events as significant entrustment, contracting, lease of other companies’ assets by the Company and vice versa. (2) In the reporting period, the Company neither provided significant guarantee to any other party nor provided guarantee for controlling subsidiaries. (3) In the reporting period, the Company didn’t entrust others to manage cash assets. V. In the reporting period, neither the Company nor the shareholders holding over 5% shares of the Company made any commitment in the unspecified newspaper or website. VI. Engagement or dismissal of Certified Public Accountants In the reporting period, the Company continued to engage Wuhan Zhonghuan Certified Public Accountants Ltd as the auditing agency. Expenses such as accommodation, travel, telecommunication, photocopying and etc. during the auditing work would be paid by Wuhan Zhonghuan Certified Public Accountants Ltd. In the reporting period, the Company had fully withdrawn auditing charge of Financial Report 2008. Wuhan Zhonghuan Certified Public Accountants Ltd. had provided auditing services to the Company for 11 fiscal years (including this year) in succession. VII. Interview and visits in the reporting period In the reporting period, the Company handled warm-heartedly the phone calls from 37 investors and received visitors in accordance with the Guidelines on Fair Information Disclosure of Listed Companies. The Company and related information disclosure obligor strictly obeyed the principle of fair information disclosure without discriminatory behavior and spilling non-public information in advance. The Company received external enquiries through two ways, phone call or face-to-face conversation with shareholders. VIII. Inspection and punishment In the reporting period, the Company, its Directors, Supervisors or Senior Executives didn’t receive any administrative punishment or criticism by circulating a notice from CSRC, or public censure from Stock Exchange. IX. The Company had no other significant events in the reporting period. X. There was no significant contingent event. XI. Balance sheet date events There was no balance sheet date event needed to be disclosed during the period from the end of report period to the date that the report is disclosed. XII. Other significant events 1. On October 27, 2008, the 10th meeting of the 4th Board of Directors approved the Proposal for Selling 51% shares in Wuhan WuGuo ZhiXin Environmental Protection Equipment Manufacturing Co., Ltd (“Zhixin Company”). The detailed contents of this Proposal was disclosed in the Announcement of Resolutions of the 10th meeting of the 4th Board of Directors of the Company and in the Announcement about the Company’s Selling 51% shares in Zhixin Company in Securities Times and Ta Kung Pao on October 30, 2008. The related share transfer procedure before Wuhan Jiangxia Administration of Industry and Commerce was completed on November 6, 2008. Since then, the Company has no any share in Zhixin Company. So, Zhixin Company was not included in 2008 Annual Results. 2. Loan expense: (1) In this fiscal year, the amount of Capitalizing Loan Cost is RMB 9,734,476.20. (2) In this fiscal year, the capitalization rate of loan cost is 7.18%. 3. All shares of the Company in Wuhan WuGuo ZhiXin Environmental Protection Equipment Manufacturing Co., Ltd had been sold in this reporting period. 4. Previous parent company, Wuhan Boiler (Group) Co., Ltd, entered share transfer agreement with Alstom (China) Investment Co., Ltd on April 14, 2006. The transaction was completed on August 24, 2007 after approval of relevant authorities. Alstom (China) Investment Co., Ltd is parent company of the Company currently with 51% shareholdings. The transaction includes the following key elements according to the Share Transfer Agreement (hereinafter as the “SPA”) signed on April 14, 2006: （ 1 ） License, Technical Transfer and Assistance Agreement between Alstom 38 Technology Ltd and the Company about Steam Generator; （ 2 ） Relocation and Relocation Team Agreement, Relocation Compensation Agreement; （3）Statements and guarantee about related assets (including inventories and items in progress) and liabilities, and further compensation guarantee, with the Company as the beneficiary under SPA; （4）Account Management Agreement, AR Service Agreement and other additional agreements include Framework Agreement about Product & Service Supply, Administration Service Agreement, Agreement about Special Boilers, Alstom Trademark Licensing Agreement, Patent Transfer Agreement, Copyrights and Design Transfer Agreement from WBC to WBG, Copyrights and Design Transfer Agreement from WBG to WBC, Shareholders’ Agreement, Supplementary Shareholders’ Agreement, Supplementary Agreement to Share Transfer Agreement, and Supplementary Agreement to Relocation Agreement. To the extent applicable, the value of the elements described above has been included in the preparation of 2008 financial statements. The full execution of above Agreements is critical to the future financial viability of the Company. 39 Section XI Financial Report I. Auditing opinions Wuhan Zhonghuan Certified Public Accountants Ltd. had audited the Financial Report 2008 of the Company and issued a standard unqualified Auditors’ Reports for the Company. (1) Auditors’ Reports (attached) (2) Financial Statements and Notes (attached) Section XII Documents Available For Reference 1. Accounting statements with the signatures and seals of the Legal Representative, Chief Accountant, and the persons in charge of the accounting departments; 2. Original copy of the Auditors’ Report with the signatures and seals of Chinese CPAs, and audited by Wuhan Zhonghuan Certified Public Accountants Ltd.; 3. Original copies of all documents of the Company and originals of the public notices disclosed in Securities Times and Ta Kung Pao in the reporting period; 4. Original copy of the Annual Report 2008 of the Company. In the event of inconsistency, the Chinese text of this annual report prevails over its English (version) translation. Wuhan Boiler Company Limited Chairman of the Board of Directors: YEUNG Kwok Wei Richard April 22, 2009 40 ZHONG HUAN Office: 16-18/F, Wuhan International Building, CERTIFIED PUBLIC ACCOUNTANTS Postcode:430022 Tel ：(86)(27)85826771 Fax：(86)(27) 85424329 AUDITOR’S REPORT ZHSZ (2009) No.396 TO THE SHAREHOLDERS OF WUHAN BOILER CO., LTD. We have audited the accompanying financial statements of Wuhan Boiler Co., Ltd (the “Company”), which comprise the balance sheet and the consolidated balance sheet as at December 31 2008, the income statement, the consolidated income statement, the statement of change in equity, the consolidated statement of change in equity, the cash flow statement and the consolidated cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes. Management's responsibility for the financial statements Preparing financial statements in compliance with Chinese Accounting Standard (2006) is the responsibility of the Company’s management. This responsibility includes: designing, implementing and maintaining internal controls relevant to the preparation of these financial statements to prevent these financial statements from material misstatement arising from fraud or error; selecting and applying proper accounting policies; and making reasonable accounting estimates. Auditor's responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audit in accordance with Auditing Standards for CICPA. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit includes performing audit procedures, so as to obtain audit evidence to support the amounts and disclosures in the financial statements. Audit procedures are relied on the auditors’ judgments, including assessment on the risk of material misstatement of these financial statements 41 arising from fraud or error. In risk assessment procedures, we consider internal controls relating to the preparation of these financial statements to design appropriate audit procedures, but our objective is not to express our opinion on the effectiveness of internal controls. An audit also includes assessing the reasonability of accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statements presentation. We believe that the audit evidence we have obtained is sufficient and effective, providing a reasonable basis for our opinion. Opinion In our opinion, the financial statements comply with Chinese Accounting Standard (2006), and present fairly in all material respects the financial position of the Company as of December 31 2008 and the results of its financial performance and its cash flows for the year then ended. Wuhan Zhonghuan Certified Public Accountants CICPA CICPA Wuhan, China April 22, 2009 42 Consolidated Balance Sheet (Assets) Consol. No.1 Wuhan Boiler Co., Ltd Unit ：RMB Assets Notes 31-Dec-08 31-Dec-07 Current assets Cash and cash equivalents 8.1 47,867,354.63 171,765,248.14 Settlement fund Outgoing call loan Trading finanical assets Notes receivable 8.2 380,000.00 136,760,360.00 Accounts receivable 8.3 953,598,124.44 782,963,441.98 Prepayment 8.4 141,863,705.37 155,628,357.39 Insurance receivables Reinsurance Receivable Provision of reinsurance contract reserve receivable Interests receivable Divident receivable Other receivables 8.5 132,916,376.39 1,977,369.91 Financial assets purchased under agreement to resell Inventories 8.6 918,505,849.66 1,011,410,161.15 Non-current assets due within 1-year Other current assets Total current assets 2,195,131,410.49 2,260,504,938.57 Non-current assets ： Loan and payment on other's behalf disbursed Available-for-sale financial assets Investment held to maturity Long-term receivables Long-term equity investment Investment property Fixed assets 8.7 121,851,170.82 148,360,635.60 Construction in progess 8.8 406,345,860.06 36,791,471.94 Engieering materials Disposal of fixed assets Production biological assets Oil-gas assets Intangible assets 8.9 64,344,904.52 21,776,254.92 R&D expenses Goodwill Long-term deferred expenses 8.10 100,000.00 250,000.00 Deferred tax assets 8.11 73,930,972.26 57,697,907.59 Other non-current assets 8.10 6,174,943.43 Total non-current assets 672,747,851.09 264,876,270.05 Total assets 2,867,879,261.58 2,525,381,208.62 Legal representative: Chief Financial official: Chief accountant: 43 Consolidated Balance Sheet(Liabilities and Equity) Consol. No.1 Wuhan Boiler Co., Ltd ： Unit RMB Liabilities and shareholder's equity Notes 31-Dec-08 31-Dec-07 ： Current liabilities Short-term loans 8.13 1,924,000,000.00 779,400,000.00 Loans from central bank Deposits received and hold for others Call loan received Held-for-trading financial liabilities Notes payable 8.14 433,649,225.98 719,840,009.40 Accounts payable 8.15 532,731,198.18 455,383,537.42 Advance from customers 8.16 10,442,136.73 170,572,080.73 Financial assets sold under agreements to repurchase Fees and commissions payable Payroll payable 8.17 44,989,865.76 47,487,388.18 Taxes payable 8.18 -102,911,718.25 18,507,442.73 Interests payable 3,046,367.05 1,836,931.25 Divident payable 8.19 562,000.00 612,000.00 Other payables 8.20 25,258,271.32 14,856,974.17 Amount due to reinsurance Insurance contract provision Entrusted trading of sesurities Entrusted selling of securities Non-current liabilities due within 1-year 8.21 90,000,000.00 Other current liabilities ： Total current liabilities 2,961,767,346.77 2,208,496,363.88 Non-current liabilities ： Long-term loans 8.22 100,000,000.00 160,000,000.00 Bonds payable Long-term payables Specific payables Provision for liabilities Deferred taxes liabilities 8.11 2,696.51 2,696.51 Other non-current liabilities 8.23 20,646,122.33 ： Total non-current liabilities 120,648,818.84 160,002,696.51 Total liabilities 3,082,416,165.61 2,368,499,060.39 Shareholders' Equity ： Share capital 8.24 297,000,000.00 297,000,000.00 Capital surplus 8.25 174,659,407.46 174,854,304.12 ： Less Treasury Stock Surplus reserve 8.26 39,418,356.83 39,418,356.83 General risk provision Retained earnings 8.27 -729,366,846.47 -375,432,508.86 Foreign exchange difference Total shareholders' equity attributable to holding company -218,289,082.18 135,840,152.09 Minority interest 3,752,178.15 21,041,996.14 Total shareholder's equity -214,536,904.03 156,882,148.23 Total liabilities & shareholder's equity 2,867,879,261.58 2,525,381,208.62 Legal representative: Chief Financial official: Chief accountant: 44 Consolidated Income Statement Consol. No.2 Wuhan Boiler Co., Ltd Unit ：RMB Items Notes Year 2008 Year 2007 I. Total renenue 1,121,071,252.12 1,770,372,881.47 Including: renenue 8.28 1,121,071,252.12 1,770,372,881.47 Interests income Insurance fee income Fee and commission income II. Total cost of sales 1,499,426,017.65 2,292,663,853.31 Including: Cost of sales 8.28 1,113,022,567.22 1,877,184,531.08 Interests expenses Service charge and commission income Insurance discharge payment Claim expenses-net Provision for insurance contract reserve-net Insurance policy dividend paid Reinsurance expense Business taxes and surcharges 8.29 5,228,738.43 11,397,013.25 Distribution expenses 8.30 6,198,590.04 29,866,560.96 Administrative expenses 115,279,632.30 130,098,858.36 Financial costs 8.31 96,508,269.91 64,585,424.10 Impairment loss 8.32 163,188,219.75 179,531,465.56 Plus: gain/loss on change in fair value (“-”for loss) 8.33 -1,015,005.38 gain/loss on investment(“-”for loss) 8.34 -1,354,516.32 321,946.87 Including: income from investment on associates and jointly ventures Gain or loss on foreign exchange difference (“-”for loss) III. Operating profit(“-”for loss) -380,724,287.23 -521,969,024.97 Plus: non-operating income 8.35 10,669,480.02 2,627,004.53 Less: non-operating expense 8.36 2,513,546.21 2,351,753.27 Including: loss from disposal of non-current asset 2,095,722.89 1,704,548.03 IV. Total profit(“-”for loss) -372,568,353.42 -521,693,773.71 Less: income tax expense 8.37 -14,895,591.36 -43,430,777.93 V. Net profit(“-”for loss) -357,672,762.06 -478,262,995.78 including: net profit gained by combined company before combination Including:Attributable to equity holders of the parent company -353,934,337.61 -480,602,218.59 Minority interest -3,738,424.45 2,339,222.82 VI. Earnings per share ￥ (I) basic earnings per share ( /share) 8.38 -1.19 -1.62 ￥ (II) diluted earnings per share ( /share) 8.38 -1.19 -1.62 Legal representative: Chief Financial official: Chief accountant: 45 Consoliated Cashflow Statement Consol. No. 3 Wuhan Boiler Co., Ltd Unit:RMB Items Notes Year 2008 Year 2007 1. Cash flows from operating activities Cash received from sales of goods or rending of services 1,120,531,878.78 2,597,627,375.44 Net increase of deposits received and held for others Net increase of loans from central bank Net increase of inter-bank loans from other financial assets Cash received against original insurance contract Net Cash received from reinsurance Net increase of client deposit and investment Cash received from disposal of held-for-trading financial assets Cash received as Interests, fees and commissions received Net increase of inter-bank fund received Cash received under repurchasing, net Tax returned Other cash received from operating activities 8.39 283,286.98 25,001,439.42 Sub-total of cash inflow from operating activities 1,120,815,165.76 2,622,628,814.86 Cash paid for goods and services 1,740,194,953.61 2,394,660,387.82 Net increase of loans and advances Net increase of deposit in central bank,banks and other financial institutions Cash paid for original contract claim Cash paid for interests, fees and commission Cash paid for policy dividend Cash paid to and for employees 130,952,575.68 113,327,300.13 Cash paid for all types of taxes 42,135,501.79 145,173,899.33 Other cash paid relating to operating activities 8.39 37,121,932.48 59,401,277.15 Sub-total of cash outflows frome operating activities 1,950,404,963.56 2,712,562,864.43 Net cash outflow from operating activities -829,589,797.80 -89,934,049.57 2. Cash Flows from Investing Activities Cash received from return of investments Cash received from investment income 321,946.87 Net cash received from disposal of fixed assets, intangible assets and other long-term assets 1,374,199.21 4,082,030.00 Net cash received from disposal of subsidiaries and other operating units 387,061.57 Other cash received relating to investing activities 8.39 81,491,563.01 78,664,866.94 Sub-total of cash inflows of investing activities 83,252,823.79 83,068,843.81 Cash paid for acquisition of fixed assets, intangible assets and other long-term assets 360,032,680.20 47,096,952.24 Cash paid for acquisition of investments 10,984,500.00 Net increase of pledge loans Net cash paid for acquisition of subsidiaries and other operating units Other cash paid relating to investing activities 8.39 2,757,704.48 Sub-total of cash outflows of investing activities 373,774,884.68 47,096,952.24 Net cash inflow from investing activities -290,522,060.89 35,971,891.57 3. Cash Flows from Financing Activities: Cash received from investment Including: Cash received from minority shareholders of subsidiaries Cash received from borrowings 2,640,000,000.00 961,400,000.00 Cash received from bonds issuing Cash received relating to financing activities Sub-total of cash inflows of financing activities 2,640,000,000.00 961,400,000.00 Cash paid for repayments of borrowings 1,462,500,000.00 857,000,000.00 Cash paid for dividends, profit distribution or interest 101,171,349.39 72,197,090.77 Including: dividends or profits paid to minority shareholders by subsidiaries 2,492,169.14 Other cash paid relating to financing activities Sub-total of cash outflows of financing activities 1,563,671,349.39 929,197,090.77 Net cash inflow from financing activities 1,076,328,650.61 32,202,909.23 4. Effect of foreign exchange rate changes -30,493.88 -709,919.41 5. Net decrease in cash and cash equivalents -43,813,701.96 -22,469,168.18 Add : Cash and cash equivalents at the beginning of the year 8.39 81,425,726.08 103,894,894.26 6. Cash and cash equivalents at the end of the year 8.39 37,612,024.12 81,425,726.08 Legal representative: Chief Financial official: Chief accountant: 46 Consolidated Statement of Change in Equity Wuhan Boiler Co., Ltd Year 2008 shareholders' equity belonged to parent company Items Less: General Surplus Retain Share capital Capital reserve Treasur Risk reserve earnin y stock provision I. Balance at 31 December, 2007 297,000,000.00 174,854,304.12 39,418,356.83 -375,432,5 Plus: adjustment for business combination under common control Change in accounting policies Correction of errors in previous period Others II. Balance at 1 January, 2008 297,000,000.00 174,854,304.12 39,418,356.83 -375,432,5 III. Increase/ decrease during the financial year (“-”for loss) -194,896.66 -353,934,3 (I) Net profit -353,934,3 (II) Gain and loss recognised directly in equity 1. Net changes in fair value of available-for-sale financial assets 2. Effects on changes in equity of invested companies under equity method 3. Deffered tax effect 4. Others Subtotal of (I)and (II) -353,934,3 (III) Contributions and decrease of capital -194,896.66 1. Contributions by shareholders -194,896.66 2. Equity settled share-based payment 3. Others (IV) Profit distribution 1. Surplus reserve accrued 2. General risk provision accrued 3. Distribution to shareholders 4. Others (V) Transfer within shareholders' equity 1. Captial reserve transferred to capital (share capital) 2. Surplus reserve transferred to capital (share capital) 3. Surplus reserve offsetting losses 4. Others IV. Balance at 31 December, 2008 297,000,000.00 174,659,407.46 39,418,356.83 -729,366,8 Legal representative: ChiefChief Financial financial official: official: Ch Consolidated Statement of Change in Equity Wuhan Boiler Co., Ltd Year 2007 shareholders' equity belonged to parent company Items Less: General Surplus Retain Share capital Capital reserve Treasur Risk reserve earnin y stock provision I. Balance at 31 December, 2006 297,000,000.00 179,375,997.41 44,396,845.22 94,765,6 Plus: Change in accounting policies -4,521,693.29 -4,978,488.39 16,344,0 Correction of errors in previous period Others II. Balance at 1 January, 2007 297,000,000.00 174,854,304.12 39,418,356.83 111,109,7 III. Increase/ decrease during the financial year (“-”for loss) -486,542,2 (I) Net profit -480,602,2 (II) Gain and loss recognised directly in equity 1. Net changes in fair value of available-for-sale financial assets 2. Effects on changes in equity of invested companies under equity method 3. Deffered tax effect 4. Others Subtotal of (I)and (II) -480,602,2 (III) Contributions and decrease of capital 1. Contributions by shareholders 2. Equity settled share-based payment 3. Others (IV) Profit distribution -5,940,0 1. Surplus reserve accrued 2. General risk provision accrued 3. Distribution to shareholders -5,940,0 4. Others (V) Transfer within shareholders' equity 1. Captial reserve transferred to capital (share capital) 2. Surplus reserve transferred to capital (share capital) 3. Surplus reserve offsetting losses 4. Others IV. Balance at 31 December, 2007 297,000,000.00 174,854,304.12 39,418,356.83 -375,432,5 Legal representative: ChiefChief Financial financial official: official: Ch Balance Sheet (Assets) Consol. No.1 Wuhan Boiler Co., Ltd Unit ：RMB Assets Notes 31-Dec-08 31-Dec-07 Current assets Cash and cash equivalents 31,599,034.00 159,076,777.05 Trading finanical assets Notes receivable 127,340,360.00 Accounts receivable 9.1 942,918,219.40 767,053,757.68 Prepayment 141,118,425.37 152,702,118.07 Interest receivables Dividend receivables Other receivables 9.2 132,785,791.48 1,200,525.42 Inventories 905,820,307.66 996,195,131.77 Non-current assets due within 1-year Other current assets Total current assets 2,154,241,777.91 2,203,568,669.99 Non-current assets ： Available-for-sale financial assets Investment held to maturity Long-term receivables Long-term equity investment 9.3 39,234,287.13 33,349,922.28 Investment property Fixed assets 118,360,293.74 133,845,667.38 Construction in progess 406,345,860.06 36,781,031.94 Engieering materials Disposal of fixed assets Production biological assets Oil-gas assets Intangible assets 64,344,904.52 21,471,754.92 R&D expenses Goodwill Long-term deferred expenses 100,000.00 250,000.00 Deferred tax 73,797,278.51 57,564,213.84 Other non-current assets 6,174,943.43 Total non-current assets 708,357,567.39 283,262,590.36 Total assets 2,862,599,345.30 2,486,831,260.35 Legal representative: Chief Financial official: Chief accountant: 49 Balance Sheet(Liabilities and Equity) Consol. No.1 Wuhan Boiler Co., Ltd Unit ：RMB Liabilities and shareholder's equity 31-Dec-08 31-Dec-07 Current liabilities ： Short-term loan 1,924,000,000.00 775,000,000.00 Held-for-trading financial liabilities Notes payable 433,649,225.98 727,840,009.40 Accounts payable 529,612,333.97 449,676,189.40 Advance from customers 10,342,136.73 167,736,180.73 Payroll payable 44,680,505.04 46,480,762.67 Taxes payable -103,411,510.50 14,757,796.63 Interests payable 3,046,367.05 3,474,931.25 Dividend payables Other payables 44,276,690.75 25,639,687.86 Non-current liabilities due within 1-year 90,000,000.00 Other current liabilities ： Total current liabilities 2,976,195,749.02 2,210,605,557.94 Non-current liabilities： Long-term loans 100,000,000.00 160,000,000.00 Bonds payable Long-term payables Specific payables Provision for liabilities Deferred taxes liabilities 2,696.51 2,696.51 Other non-current liabilities 20,646,122.33 Total non-current liabilities ： 120,648,818.84 160,002,696.51 Total liabilities 3,096,844,567.86 2,370,608,254.45 Shareholders' Equity ： Share capital 297,000,000.00 297,000,000.00 Capital surplus 174,854,304.12 174,854,304.12 ： Less Treasury Stock Surplus reserve 39,418,356.83 39,418,356.83 Retained earning -745,517,883.51 -395,049,655.05 Total shareholders' equity: -234,245,222.56 116,223,005.90 Total liabilities and shareholders' equity: 2,862,599,345.30 2,486,831,260.35 Legal representative: Chief Financial official: Chief accountant: 50 Income Statement Consol. No.2 Wuhan Boiler Co., Ltd Unit ：RMB Items Notes Year 2008 Year 2007 I. Total renenue 9.4 1,093,604,084.61 1,728,696,265.72 Less ：cost of sales 9.4 1,091,202,762.12 1,853,278,195.43 Business taxes and surcharges 4,164,752.45 9,590,962.54 Distribution expenses 4,720,721.57 27,604,162.51 Administrative expenses 107,582,012.72 126,273,539.78 Financial costs 94,948,752.50 64,761,329.38 Impairment loss 161,673,699.87 179,542,863.41 Plus: gain/loss on change in fair value (“-”for loss) -1,015,005.38 gain/loss on investment(“-”for loss) 9.5 -3,580,135.15 4,436,339.30 Including: income from investment on associates and jointly ventures Ⅱ. Operating profit(“-”for loss) -375,283,757.15 -527,918,448.03 Plus: non-operating income 10,659,579.81 2,627,004.53 Less: non-operating expense 2,077,115.79 2,281,551.97 Including: loss from disposal of non-current asset 1,760,411.19 1,690,434.61 Ⅲ. Total profit(“-”for loss) -366,701,293.13 -527,572,995.47 Less: income tax expense -16,233,064.67 -46,885,902.69 Ⅳ. Net profit(“-”for loss) -350,468,228.46 -480,687,092.78 Ⅴ. Earnings per share ￥ (I) basic earnings per share ( /share) -1.18 -1.62 ￥ (II) diluted earnings per share ( /share) -1.18 -1.62 Legal representative: Chief Financial official: Chief accountant: 51 Cashflow Statement Consol. No. 3 Wuhan Boiler Co., Ltd Unit:RMB Items Notes Year 2008 Year 2007 1. Cash flows from operating activities Cash received from sales of goods or rending of services 1,061,395,602.35 2,551,107,411.88 Tax returned Other cash received from operating activities 9.6 23,325.32 25,001,439.42 Sub-total of cash inflows from operating activities 1,061,418,927.67 2,576,108,851.30 Cash paid for goods and services 1,715,250,053.74 2,372,369,295.29 Cash paid to and for employees 111,126,491.37 93,951,774.82 Cash paid for all types of taxes 32,832,649.05 134,327,181.76 Other cash paid relating to operating activities 9.6 39,018,514.27 55,438,720.97 Sub-total of cash outflows from operating activities 1,898,227,708.43 2,656,086,972.84 Net cash flow from operating activities -836,808,780.76 -79,978,121.54 2. Cash Flows from Investing Activities Cash received from return of investments Cash received from investment income 4,436,339.30 Net cash received from disposal of fixed assets, intangible assets and other long-term assets 857,955.00 4,082,030.00 Net cash received from disposal of subsidiaries and other operating units 1,520,000.00 Other cash received relating to investing activities 9.6 81,409,320.69 78,532,870.35 Sub-total of cash inflows of investing activities 83,787,275.69 87,051,239.65 Cash paid for acquisition of fixed assets, intangible assets and other long-term assets 359,694,745.15 46,802,786.28 Cash paid for acquisition of investments 10,984,500.00 Net cash paid for acquisition of subsidiaries and other operating units Other cash paid relating to investing activities 9.6 2,722,864.08 Sub-total of cash outflows of investing activities 373,402,109.23 46,802,786.28 Net cash flow from investing activities -289,614,833.54 40,248,453.37 3. Cash Flows from Financing Activities: Cash received from investment Cash received from borrowings 2,640,000,000.00 955,000,000.00 Cash received relating to financing activities Sub-total of cash inflows of financing activities 2,640,000,000.00 955,000,000.00 Cash paid for repayments of borrowings 1,461,000,000.00 854,000,000.00 Cash paid for dividends, profit distribution or interest 99,939,443.32 69,129,676.24 Other cash payments relating to financing activities Sub-total of cash outflows of financing activities 1,560,939,443.32 923,129,676.24 Net cash flow from financing activities 1,079,060,556.68 31,870,323.76 4. Effect of foreign exchange rate changes -30,493.88 -709,919.41 5. Increase in cash and cash equivalents -47,393,551.50 -8,569,263.82 Add : Cash and cash equivalents at the beginning of the year 9.6 68,737,254.99 77,306,518.81 6. Cash and cash equivalents at the end of the year 9.6 21,343,703.49 68,737,254.99 Legal representative: Chief Financial official: Chief accountant: 52 Statement of Change in Equity Wuhan Boiler Co., Ltd Year 2008 Items Less: Share capital Capital reserve Surplus Treasury stock I. Balance at 31 December, 2007 297,000,000.00 174,854,304.12 39,418 Plus: change in accounting policies Correction of errors in previous period Others II. Balance at 1 January, 2008 297,000,000.00 174,854,304.12 39,418 III. Increase/ decrease during the financial year (“-”for loss) (I) Net profit (II) Gain and loss recognised directly in equity 1. Net changes in fair value of available-for-sale financial assets 2. Effects on changes in equity of invested companies under equity method 3. Deffered tax effect 4. Others Subtotal of (I)and (II) (III) Contributions and decrease of capital 1. Contributions by shareholders 2. Equity settled share-based payment 3. Others (IV) Profit distribution 1. Surplus reserve accrued 2. Distribution to shareholders 3. Others (V) Transfer within shareholders' equity 1. Captial surplus transferred to capital (share capital) 2. Surplus reserve transferred to capital (share capital) 3. Surplus reserves offsetting losses 4. Others IV. Balance at 31 December, 2008 297,000,000.00 174,854,304.12 39,418 Legal representative: Chief Financial official: Statement of Change in Equity Wuhan Boiler Co., Ltd Year 2007 Items Less: Share capital Capital reserve Surplus Treasury stock I. Balance at 31 December, 2006 297,000,000.00 179,375,997.41 40,623 Plus: change in accounting policies -4,521,693.29 -1,204 Correction of errors in previous period Others II. Balance at 1 January, 2007 297,000,000.00 174,854,304.12 39,418 III. Increase/ decrease during the financial year (“-”for loss) (I) Net profit (II) Gain and loss recognised directly in equity 1. Net changes in fair value of available-for-sale financial assets 2. Effects on changes in equity of invested companies under equity method 3. Deffered tax effect 4. Others Subtotal of (I)and (II) (III) Contributions and decrease of capital 1. Contributions by shareholders 2. Equity settled share-based payment 3. Others (IV) Profit distribution 1. Surplus reserve accrued 2. Distribution to shareholders 3. Others (V) Transfer within shareholders' equity 1. Captial surplus transferred to capital (share capital) 2. Surplus reserve transferred to capital (share capital) 3. Surplus reserves offsetting losses 4. Others IV. Balance at 31 December, 2007 297,000,000.00 174,854,304.12 39,418 Legal representative: Chief Financial official: NOTES TO THE FINANCIAL STATEMENTS As of December 31, 2008 Important Notes: This report has been prepared in Chinese version and English version respectively. In the event of difference in interpretation between the two versions, the Chinese report shall prevail. Note 1 Description of bussiness Wuhan Boiler Co., Ltd (the “Company”) was established by Wuhan Boiler (Group) Co., Ltd (the “Group”) with the exclusive operating assets of boiler manufacturing in September 1997 and listed in B share market in April 1998. The share capital of the Company is 297,000,000 shares. The “Group” holds 172,000,000 shares accounting for 57.91% shareholding and the public shareholding (Domestically listed share in foreign currency) is 125,000,000 shares accounting for 42.09% shareholding. The Company's B-shares listed in the Shenzhen Stock Exchange. The Company obtained the corporate business license documented as Qi Gu Er Zong Fu Zi No.002591 on November 16, 1998. The Group transferred its 51% shareholding of Wuhan Boiler Co., Ltd to Alstom (China) Investment Co., Ltd in 2007 with approval of State-owned Assets Supervision and Administration Commission of the State Council. The share transfer procedures were completed in August 2007. Alstom (China) Investment Co., Ltd holds 151,470,000 shares accounting for 51% shareholding; Wuhan Boiler (Group) Co., Ltd holds 20,530,000 shares accounting for 6.91% shareholding and public tradable shares is 125,000,000 accounting for 42.09% shareholding as at December 31, 2007. 1. The register capital of the Company is 297,000,000.00. 2. The address of its registered office is 586 Wuluo Road, Wuhan City, Hubei Province. 3. The company's legal representative is Guowei Yang. 4. Business scope of the Company is researching, designing, developing and manufacturing of types I, II, III pressure vessels, power station boilers, special boilers, auxiliary boilers, desulfurization equipments and so on. The Company is a big boiler manufacturing enterprise and the main operating actibities are in China. The major customer markets of the Company are various power plants and power stations. Certain products are auxiliary equipments and pressure vessels target refineries and chemical enterprises. The Company produces three categories products: power station boilers, special 55 boilers and other products. Power station boils are used in power stations. Special boilers are designed and manufactured according to customers’ profit and loss balance combustion technology or specific requirement of fuel, which is energy saving and enviorment friendly. The special boilers include alkali recovery boilers, circulating fluidized bed boilers, bagasse-fired boilers, the stand vertical-burning boilers, liquid slag-off boilers, waste heat boilers and so on. 5. Parent company of the Company is Alstom (China) Investment Co., Ltd. The parent company of Alstom (China) Investment Co., Ltd.is Alstom Holdings . 6. These financial statements were authorised for issue in accordance with the resolution of the 4th section of the 12th Meeting of Board of Director on April 22, 2009. Note 2 Basic of preparation of financial statements The financial statements have been prepared on the basic assumption of going concern and on the accrual basis of accounting. The effects of evens and other transactions actually occurred and they have been recorded and measured in accordance with the Chinese Accounting Standards (2006): Framework and other accounting standards. Note 3 Declaration of following the accounting standard The financial statements prepared by the Company are truly and completely reflect the financial position, operation result and cash flow of the Company. Note 4 Main accounting policies and estimates 1. Fiscal year The accounting period of the Group is from January 1 to December 31 of the Gregorian calendar. 2. Monetary unit Renminbi (RMB) is used as the accounting standard currency. 3. Measurement of the elements of the financial statements in this fiscal year 56 (1) The financial statements adopted by the company are prepared on the historical cost convention. When the amount of the accounting elements are determinable and obtainable, the selection of other particular basis of measurement such as replacement cost, net realisable value, present value and fair value may applied. (2) There is no change in measurement of the elements of the financial statements adopted by the company this fiscal year. 4. Cash equivalents Cash equivalents are short-term, highly-liquid investments that are both readily convertible to known amounts of cash, and so near their maturity that they present insingnificant risk of changes in interest rates. Generally only investments with original maturities of three months or less qualify under these definitions. 5. Transactions of foreign currencies Any transaction is translated into the accounting standard currency according to the approximate exchange rate of the sight rate on the occurrence date of the transaction. (1) Foreign currency exchange difference The foreign currency monetary and non-monetary items are translated at balance sheet dates as following: The monetary items of foreign currencies at the year end are converted with the closing rate on the date of balance sheet. Exchange differences arising on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous financial statements is recognised in profit or loss in the period in which they arise. Non-monetary items in foreign currencies measured with historical costs are not changed their amounts in the accounting standard currency but coverted with the spot rate on the date of the transaction. Non-monetary items in foreign currencies measured with fair value are converted according to the spot rate on the date of confirming fair value. Exchange difference arising on translated accounting standard currency and original accounting standard currency is recognised as a change of fair value (including change in exchange rate) in profit or loss in the period. Exchange difference of principle and interest of special loan which satisfies capitalised conditions is capitalised 57 as cost of the assets during the capitalisation period. (2) Translation of financial statements stated in foreign currency: While conversion of financial statements for overseas business, the Company adopts the following principle: The items of assets and liabilities in the balance sheet are used with the spot rate on the balance sheet date for conversion, and the items of owners’ equity, except the item “undistributed profit”, are converted with the spot rate when occurrence. The items of incomes and expenses in the profit and loss statement are converted with approximate exchange rate of the sight rate on the transaction occurring date. The conversion difference of financial statements in foreign currencies arising from the above conversion is separately listed in the item of shareholders’ equity in the balance sheet. Exchange difference arised from conversion of financial statements is presented separately as equity item. The same principle is applied in the comparative financial statements. 6. Recognition and measurement of financial instrument (1) Recognition of financial instrument The Company recognises a financial asset or fiancial liability on its balance sheet when, and only when, the Company becomes a party to the contractual provisions of the instrument. (2) Classification and measurement of financial assets ① The Company classfies financial assets into financial assets at fair value through profit or loss; held-to-maturity investments; loans and receivables; and available-for-sale financial assets. ② The financial assets are initially recognised at fair value. Gains or losses arising from a change in the fair value of a financial asset at fair value through profit or loss is recognised in profit or loss when it incurred and relevant transaction costs are recognised as expense when it incurred. For other financial assets, the transaction costs are recognised as costs of the financial assets. ③ Measurement of financial assets A. A financial asset at fair value through profit or loss includes financial assets held for trading and financial assets designated by the Company as at fair value through profit or loss. The Company 58 subsequently measures the financial asset at fair value through profit or loss at fair value and recognises the gain or loss arising from a change in the fair value of a financial asset at fair value through profit or loss as profit or loss in the current period. B. Held-to-maturity investments are measured at amortised cost using the effective interest method. A gain or loss is recognised in profit or loss during the current period when the financial asset is derecognized or impaired and through the amortisation process. C. Loans and receivables are measured at amortised cost using the effective interest method. A gain or loss is recognised in profit or loss during the current period when the financial asset is derecognized or impaired and through the amortisation process. D. Available-for-sale financial assets are measured at fair value and the gain or loss arising from a change in the fair value of available-for-sale financial assets is recognised as capital reserve which is transferred into profit or loss when it is impaired or derecognised. Interests or cash dividends during the holding period are recognised in profit or loss for the current period. ④ Impairment of financial assets A. The Company performs an impairment review for all financial assets except those measured at fair value through profit or loss. The Company recognises impairment loss and provides provision for impairment of financial assets when there is any objective evidence indicated impairment. B. The objective evidences indicated impairment which the Company uses to determine the impairment are as following: a) Significant financial difficulty of the issuer or obligor; b) A breach of contract, such as a default or delinquency in interest or principal payments; c) The lender, for economic or legal reasons relating to the borrower's financial difficulty, granting to the borrower a concession that the lender would not otherwise consider; d) It becoming probable that the borrower will enter bankruptcy or other financial reorganisation; e) The disappearance of an active market for that financial asset because of financial difficulties of 59 the issuer; f) Observable data indicating that there is a measurable decrease in the estimated future cash flows from a group of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the group; including (i) adverse changes in the payment status of borrowers in the group; or (ii) national or local economic conditions that correlate with defaults on the assets in the group (eg. an increase in the unemployment rate in the geographical area of the borrowers, a decrease in property prices for mortgages in the relevant area, or adverse changes in industry conditions that affect the borrowers in the group). g) Significant adverse changes occur in the debtor's business technology, market, economic or legal environment, so that the investment costs may not able to recover; h) A significant or non-temporary decrease in fair value of equity investment instruments; i) Other objective evidences indicate impairment of financial assets. C. Measurement of impairment loss of financial assets a) Measurement of impairment loss of held-to-maturity investment, loans and receivables If there is objective evidence that an impairment loss on loans and receivables or held-to-maturity investments carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows. The amount of the loss is recognised in profit or loss of the current period. The Company assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. If the Company determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not included in a collective assessment of impairment. The Company performs impairment test for receivables and provide provision for impairment loss of receivables at each balance sheet date. For the individually significant receivables, the impairment test 60 is carried on individually. If there is objective evidence that an impairment loss on loans and receivables, the Company provides provision for impairment loss for the amount which is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows. For the receivables which are not individually significant or the individually significant receivables which are not determined for impairment, the Company asseses the asset in a group of financial assets with similar credit risk characteristics and collectively provide them for provision of impairment according to certain percentage of the total receivables at the balance sheet date. The Comapany determines the percentage of provision for bad debt of receivables considering both actual loss of previous receviables or receivables with similar credit risk characteristics and aging of current receibables. The current percentage of provision for bad debt of receivables is as following: Percentage of provision for bad debt of receivables Aging of receivables Percentage of provision for bad debt Within 1 year 3% 1-2 years 3% 2-3 years 6% 3-5 years 20% Over 5 years 100% If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss of financial asset measured at amortised cost is be reversed. The amount of the reversal is recognised in profit or loss of the current period. b) Available-for-sale financial assets When a decline in the fair value of an available-for-sale financial asset has been recognised directly in equity, the cumulative loss that had been recognised directly in equity is removed from equity and recognised in profit or loss even though the financial asset has not been derecognised. 61 If there is objective evidence that an impairment loss has been incurred on an unquoted equity instrument that is not carried at fair value because its fair value cannot be reliably measured, or on a derivative asset that is linked to and must be settled by delivery of such an unquoted equity instrument, the amount of the impairment loss is measured as the difference between the carrying amount of the financial asset and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses are recognised in the profit or loss of the current period. If, in a subsequent period, the fair value of a debt instrument classified as available for sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed, with the amount of the reversal recognised in profit or loss of the current period. Impairment losses recognised in profit or loss for an investment in an equity instrument classified as available for sale is not reversed through profit or loss. For an impairment loss has been incurred on an unquoted equity instrument that is not carried at fair value because its fair value cannot be reliably measured, or on a derivative asset that is linked to and must be settled by delivery of such an unquoted equity instrument, the impairment loss is not reversed through profit or loss. (3) Classification and measurement of financial liabilities ① The Company's financial liabilities are classified as financial liabilities at fair value through profit or loss and other financial liabilities. ② Financial liabilities are initially measured at fair value. For the financial liability at fair value through profit or loss, relevant transaction costs are recognised as expense when it incurred. For the other financial liabilities, relevant transaction costs are recongnised as costs. ③ Subsequent measurement of financial liabilities A. Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated by the Company as at fair value through profit or loss. The Company measures a financial liability at fair value through profit or loss at its fair value. A gain or loss of change in fair value is recognised in the profit or loss of the current period. 62 B. Other financial liabilities are measured by amortised cost using effective interest rate. (4) Fair value measurement consideration ① If there is an active market for the financial instrument, the fair value is quoted prices in the active market. ② If the market for a financial instrument is not active, the Company establishes fair value by using a valuation technique. 7. Recognition and measurement of financial assets transfer (1) The Company derecognises financial assets when the Company transfers substantially all the risks and rewards of ownership of the financial assets. On derecognition of a financial asset in its entirety, the difference between the follows is recognised in profit or loss of the current period. ① The carrying amount of transferring financial assets; ② The sum of the consideration received and any cumulative gain or loss that had been recognised directly in equity (including financial assets transferred to available for sale category). If the transferred asset is part of a larger financial asset and the part transferred qualifies for derecognition in its entirety, the previous carrying amount of the larger financial asset is allocated between the part that continues to be recognised and the part that is derecognised, based on the relative fair values of those parts on the date of the transfer. The difference between the follows is recognised in profit or loss of the current period. ① The carrying amount allocated to the part derecognised; ② The sum of the consideration received for the part derecognised and any cumulative gain or loss allocated to it that had been recognised directly in equity (including financial assets transferred to available for sale category). A cumulative gain or loss that had been recognised in equity is allocated between the part that continues to be recognised and the part that is derecognised, based on the relative fair values of those parts. 63 (2) If a transfer does not qualify for derecognition, the Company continues to recognise the transferred asset in its entirety and shall recognize a financial liability for the consideration received. When the Company continues to recognise a financial asset to the extent of its continuing involvement, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained. 8. Inventory (1) Inventories are asset items held for sale in the ordinaery course of business or goods that will be used or consumed in the production of goods to be sold. They are divided into the following categories: goods purchased raw materials, finished goods, work-in-progress, and goods for processing on consignment. ： (2) Recognition of inventory Inventory is recognised when the following conditions are satisfied: ① The future economic benefit embodied in the inventory is the potential to contribute to the Company; ② The cost of the inventory can be measured reliably. (3) The method of measuring inventories: Raw materials and circulating materials are measured at standard cost method which the variance between standard cost and actual cost is adjusted monthly. Finished goods and work-in-progress are measured at actual cost which is allocated according to the job reference. (4) Amortisation metnhod of low-value consumption goods and packages: Low-value consumption goods and packages are fully amortised when they are required and delivered. (5) Inventories are measured at the lower of cost and net realisable value at the balance sheet date. The amount of any write-down of inventories to net realisable value and all losses of inventories are recognised as an expense in the period when the write-down or loss occurs. ① Net realisable value：Estimates of net realisable value are based on the most reliable evidence available. These estimates take into consideration of events occurring after the end of the period and 64 the purpose for which the inventory is held. Materials and other supplies held for use in the production of inventories are not written down below cost if the finished goods in which they will be incorporated are expected to be sold at or above cost. However, when a decline in the price of materials indicates that the cost of the finished goods exceeds net realisable value, the materials are written down to net realisable value. The net realisable value of the quantity of inventory held to satisfy firm sales or service contracts is based on the contract price. If the sales contracts are for less than the inventory quantities held, the net realisable value of the excess is based on general selling prices. ② The Company generally provides provision for impairment of inventory individually. For large quantity and low value items of inventories, cost and net realisable value are determined based on categories of inventories. Where certain items of inventory have similar purposes or end uses and relate to the same product line producted and marketed in the same geographical area, and therefore cannot be practicably evaluated separately from other items in that product line, costs and net realisable values of those items may be determined on an aggregate basis. (6) The Company adopts perpetual inventory system for its inventory taking. 9. Measurement of construction contracts Construction contracts are measured at the actual cost, including the direct and indirect costs incurred and attributable to a contract for the period from the date the contract is signed to the final completion of the contract. The construction contract in progress should be presented in the Balance Sheet at the net amount of payment amount after decuting the sum of the accumulated costs occurred and the accumulated margin profit (loss) recognized. The excess of the sum of the accumulated costs occurred and the accumulated margin profit (loss) recognized over the payment amount should be presented as inventory. The excess of the payment amount over the sum of the accumulated costs occurred and the 65 accumulated margin profit (loss) should be presented as advanced from customers. Costs such as travelling expenses and tender charges incurred relating to the signing of the constract should be included as contract costs when the contract is acquired, where the costs could be recognized individually and measured reliably and the contract is probably signed; otherwise it should be charged into the income statement for the period. 10. Long-term equity investment (1) Initial measurement The Company initially measures long-term equity investments under two conditions: ① For long-term equity investment arising from business combination under the common control, the cost is recognised under the following principles. If the business combination is under the common control and the acquirer obtaines long-term equity investment in the consideration of cash, non-monetary asset exchange and bearing acquiree’s liabilities, the initial cost is the proportion of the acquiree’s net asset at the acquisition date. The difference between the consideration and the cost is adjusted to capital reserve. If the capital reserve is not sufficient for adjustment, retained earning is adjusted respectively. The Company recognises the business combination costs directly attributable to the combination, such as professional fees paid to accountants, legal advisers, valuers and so on, in profit or loss of the current period when it occurred. If the acquirer issuing equity shares as consideration, the initial cost is the proportion of carrying amount of the acquiree’s net asset at the acquisition date. Amount of share capital equals to the par value of the issued shares. The difference between consideration and par value of issued shares is adjusted to capital reserve. If the capital reserve is not sufficient for adjustment, retained earning is adjusted respectively. The costs occurred in business combination such as charges of security issuing, commissions are deducted from premium of equity instruments. If the premium is not sufficient for adjustment, retained earning is adjusted respectively. B. If the business combination is not under the common control, the acquirer recognises the initial 66 cost of combination under the following principles. a) When business combination is achieved through a single exchange transaction, the cost of a business combination is the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the acquirer, in exchange for control of the acquiree. b) For the business combination involved more than one exchange transaction, the cost of the combination is the aggregate cost of the individual transactions. c) The costs directly attributed to business combination are included in the cost of combination; d) When a business combination agreement provides for an adjustment to the cost of the combination contingent on future events, the Company includes the amount of that adjustment in the cost of the combination at the acquisition date if the adjustment is probable and can be measured reliably. ② For the long-term investment obtained in any method other than business combination, the initial cost is recognised as below. A. If the long-term equity investment is obtained in cash consideration, the initial cost is the actual purchase payment which includes directly related expenses, tax and other necessary expense. B. If the long-term investment is obtained by issuing equity instruments, the initial cost is the fair value of the issued equity shares. However, cash dividends declared but unpaid or profits are not included in the cost. Direct costs attributed to issue equity instrument such as handling charges and commissions are deducted from premium of equity instruments. If the premium is not sufficient for adjustment, surplus resever and retained earning is adjusted respectively. C. For the long-term investment invested by investors, the initial cost is the agreed value of the investment agreement or contract unless the agreed value is not fair. D. For the long-term investment obtained by non-monetary asset exchange, the initial cost is recognised according to “Chinese Accounting Standard (2006) No. 7: Non-monetary asset exchange”. E. For the long-term investment obtained by restructuring, the initial cost is recognised according to “Chinese Accounting Standard (2006) No. 12: Debt restructuring”. ③ For the price paid including cash dividends or profits declared but unpaid, it is recognised as 67 receivables separately rather than as initial cost of long-term equity instruments no matter which method is obtained. (2) Subsequent measurement The Company adopts either cost method or equity method for the long-term equity investment according to the extent of influence, existence of active market and availability of fair value. The equity method is used when the Company has joint control or significant influence over the investee enterprise. The cost method is used when the Company has control or does not have joint control or significant influence over the investee enterprise and there is no quoted price in active market or there is no reliable fair value. ① For the long-term investment under cost method, declared cash dividends or profits are recognised as investment income for the current period when it incurred. The amount of investment income recognised by the Company is limited to the amount distributed out of the accumulated net profits of the investee enterprise that arose after the investment was made. The amount of profits or declared cash dividends by the investee enterprise in excess of the above threshold is treated as return of investment cost. ② For long-term equity investment under equity method, the Company adjusts carrying amount of the long-term equity investment and recognises investment income according to the proportion of net profit or loss after acquisition. The Company reduces carrying amount of the long-term investment regarding to declared cash dividend or profit distribution. For long-term equity investment under equity method, the Company recognises net losses incurred by the investee enterprise to the extent that the carrying amount and the substantial net investment of the long-term equity investment is reduced to zero except there is further obligation of the excess losses. If the investee enterprise realises net profits in subsequent periods, the Company increase the carrying amount of the investment above zero at the amount at which its share of profits exceeds its share of previously unrecognized losses. ③ The Company adopts the same manner of financial instrument for the impairment of long-term equity investment which is measured under cost method and there is no quoted price in active market 68 or there is no reliable fair value. Impairment of long-term equity investments other than above refers to accounting policy “Impirment of assets” of the Company. ④ On disposal of an equity investment, the difference between the carrying amount of the investment and the sale proceeds actually received is recognised as an investment gain or loss for the current period. When the equity method is adopted, change in equity of the investee other than profit or loss is recorded in equity. On disposal of the equity investment, amount of change which is recorded in equity previously is transferred to profit or loss for the current period regarding to the proportion of disposal. （3）Recognition of common control and significant influence: If the investment satisifies the follwing conditions, the company has common control to the investee: (1) None part of the joint venture can control the joint business activities individually; (2) Any decision of the joint venture business must be approved by all parts of the joint centure. (3) One part of the joint venture can be offered to manage daily business activities by using contract or agreement. However, the right is restricted by financial and management policies allowed by all parties of the joint venture. If the investment satisifies the following conditions, the company has significant influence to the investee: (1) there is commissary in the directorate or similar righ organization of investee. (2) Participate decision-making process, including the process of dividend distribution. (3) There is significant transaction between investor and investee. (4) Appoint manager to investee. (5) Supply key technology materials to investee. Investor holds more than 20% but less than 50% shares of investee directly or indirectly. 11. Recognition and measurement of fixed assets Fixed assets are tangible assets that: 1) are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes; and 2) have useful life more than one year. It includes Property and building, machinery, and vechile. (1) A fixed asset should be initially recognised at cost when: ① It is probable that future economic benefits associated with the asset will flow to the Company; and, 69 ② The cost of the asset can be measured reliably. (2) Depreciation Subsequent expenditure relating to a fixed asset is added to the carrying amount of the asset when the expenditure qualifies for capitalisation. Subsequent expenditure that does not qualify for capitalisation is recognised as an expense. The depreciation method adopted by the Company is straight-line method. The categories, estimated useful lives, residual value, and annual depreciation rate of fixed assets are shown as following: The categories Estimated Useful Lives (years) Residual value (%) Annual Depreciation Rate (%) Property and building 15-30 3 6.47-3.23 General machinery 7-18 3 13.86-5.39 Specific machinery 8 3 12.13 Vehicle 6 3 16.17 Electornic equipment 4-5 3 24.25-19.40 The Company reviews the useful life, estimated residual value and depreciation method of fixed assets at the end of each financial year. If expectations are significantly different from previous estimates, the useful life should be revised accordingly. If expectations are significantly different from previous estimates, the estimated residual value is also revised accordingly. If there has been a significant change in the expected realisation pattern of economic benefits from those assets, the depreciation method is changed accordingly. The changes in useful life, estimated residual value and depreciation method is treated as change in accounting estimates. (3) Fixed assets acquired under finance lease The Company identifies a lease of asset as finance lease when substantially all the risks and rewards incidental to legal ownership of the asset are transferred. A fixed asset acquired under finance lease is valued at the lower of the fair value of the leased asset and the present value of the minimum lease payments at the inception of lease. 70 The depreciation method of fixed assets acquired under finance lease is consistents with that for depreciable assets owned by the Company. If the Company can reasonably confirm that it will obtain the ownership of leased asset at the end of lease term, the leased asset should be depreciated during the useful life of the leased asset. If the Company can not reasonably confirm that it will obtain the ownership of leased asset at the end of lease term, the leased asset should be depreciated during shorter of the useful life of the leased asset and the lease term. (4) Impairment of fixed asset refers to accounting policy “Impirment of assets” of the Company. 12. Construction in progress (1) Construction in progress of the Company includes constructing property, building and equipments required installation. (2) Construction in progress is recorded at actual costs incurred. It also includes borrowing costs eligible for capitalization and gain or loss of exchange difference. (3) The Company transfers construction in progress to fixed assets when the project is completed or the project is available for use. For the construction in progress which is capable of operating in the manner intended by management without the final account for completed project, an estimated value is recognised as its cost and the depreciation amount is based on the estimated value. When the final account for completed project is obtained, cost of the asset should be adjusted to the actual cost. However, there is no need to adjust depreciation of the asset in prior period. (4) Impairment of construction in progress refers to accounting policy “Impirment of assets” of the Company. 13. Recognition and measurement of intangible assets Intangible assets are identifiable non-monetary asset that are owned or controlled by the Company and are without physical substance. (1) Recognition of intangible assets The Company recognises an intangible asset when that intangible asset fulfills both of the following conditions: a) It is probable that the economic benefits associated with that asset will flow to the Company; and 71 b) The cost of that asset can be measured reliably. Expenditures incurred during the research phase of an internal project should be recognised as expenses in the period in which they are incurred. Expenditures incurred during the development phase of an internal project should be recognized as an intangible asset if, and only if, the Company can demonstrate all of the following: ① the technical feasibility of completing the intangible asset so that it will be available for use or sale; ② its intention to complete the intangible asset and use or sell it; ③ The method that the intangible asset will generate probable future economic benefits includes the Company can demonstrate the existence of a market for the output of the intangible asset or the intangible asset itself or, if it is to be used internally, the usefulness of the intangible asset; ④ the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and ⑤ its ability to measure reliably the expenditure attributable to the intangible asset during its development (2) Measurement of intangible assets ① An intangible asset is measured initially at its cost. ② Measurement after Recognition A. For an intangible asset with finite useful life, the Company estimates its useful life at the time of acquisition and amortizes it during its useful life in a reasonable and systematic way. The amount of amortization is allocated to relevant costs and expenses according to the nature of beneficial items. The Company does not amortize intangible asset with indefinite useful life. B. Impirment of intangible assets refers to accounting policy “Impairment of assets” of the Company. 14. Impairment of assets It suggests that an asset may be impaired if there is any of the following indication: (1) during the period, an asset's market value has declined significantly more than it would be expected as a result of the passage of time or normal use during the current period; (2) significant changes with an adverse effect on the Company have taken place during the period, or 72 will take place in the near future, in the technological, market, economic or legal environment in which the Company operates or in the market to which an asset is dedicated; (3) market interest rates or other market rates of return on investments have increased during the period, and those increases are likely to affect the discount rate used in calculating an asset's value in use and decrease the asset's recoverable amount materially; (4) evidence is available of obsolescence or physical damage of an asset; (5) the asset becomes idle, or the Comopany plans to discontinue or to dispose of an asset before the previously expected date; (6) evidence is available from internal reporting that indicates that the economic performance of an asset is, or will be, worse than expected, for example, the net cash flow generated from assets or the operating profit (or loss) realized by assets is lower (higher) than the excepted amount, etc.; and (7) Other evidence indicates that assets may be impaired. The Company assesses long-term equity investment, fixed assets, construction materials, constructions in progress and intangible assets (except for those with uncertain useful life) that apply Accounting Standard for Business Enterprises No. 8 - Impairment of assets at the balance sheet date. If there is any indication that an asset may be impaired, the Company should assess the asset for impairment and estimate the recoverable amount of the impaired asset. Recoverable amount is measured as the higher of an asset's fair value less costs to sell and the present value of estimated future cash flows from continuing use of the asset. If carrying amount of an asset is higher than its recoverable amount, the carrying amount of this asset should be written down to its recoverable amount with the difference recognized as impairment loss and charged to profit or loss accordingly. Simultaneously a provision for impairment loss should be made. There is any indication that an asset may be impaired, the Company usually estimates its recoverable amount on an individual item basis. However if it’s not possible to estimate recoverable amount of the individual asset, the Company should determine the recoverable amount of the cash-generating unit to which the asset belongs. An asset's cash-generating unit is the smallest group of assets that includes the asset and generates cash 73 inflows that are largely independent of the cash inflows from other assets or groups of assets. Identification of cash-generating unit is based on whether the cash inflows generated by the cash-generating unit are largely independent of the cash inflows from other assets or groups of assets. The Company assesses goodwills acquired in a business combination and intangible assets with uncertain useful life for impairment each year no matter whether indication that an asset may be impaired exists or not. Impairment assessment of goodwill is carried together with the impairment assessment of related cash-generating unit or group of cash-generating units. Once impairment loss is recognized, it cannot be reversed in subsequent financial period. 15. Recognition and measurement of borrowing cost (1) Capitalization and capitalization period of borrowing costs The costs of borrowings designated for acquisition or construction of qualifying assets should be capitalized as part of the cost of the assets. Capitalisation of borrowing costs starts when a) the capital expenditures have incurred, b) the borrowing costs have incurred and c) the acquisition and construction activities that are necessary to bring the asset to its expected usable condition have commenced. Other borrowing costs that do not qualify for capitalization should be expensed off during current period. Capitalization of borrowing costs should be suspended during periods in which the acquisition or construction is interrupted abnormally, and the interruption period is three months or longer. These borrowing costs should be recognized directly in profit or loss during the current period. However, capitalization of borrowing costs during the suspended periods should continue when the interruption is a necessary part of the process of bringing the asset to working condition for its intended use. Capitalization of borrowing costs ceases when the qualifying asset being acquired or constructed is substantially ready for its intended use. Subsequent borrowing costs should be expensed off during the period in which they are incurred. (2) Calculation method of capitalization for borrowing costs 74 To the extent that funds are borrowed specifically for the purpose of acquiring or constructing a qualifying asset, the amount of borrowing costs eligible for capitalization on that asset is determined as the actual borrowing costs incurred on that borrowing during the period less any investment income on the temporary investment of the borrowing. To the extent that funds are borrowed generally and used for the purpose of acquiring or constructing a qualifying asset, the amount of borrowing costs eligible for capitalization shall be determined by applying a capitalization rate to the weighted average of excess of accumulated expenditures on qualifying asset over that on specific purpose borrowing. The capitalization rate is the weighted average of the borrowing costs applicable to the borrowings of the Company that are outstanding during the period, other than borrowings made specifically for the purpose of acquiring or constructing a qualifying asset. 16. Revenue (1) Construction contract revenue a) When the outcome of a construction contract can be estimated reliably, contract revenue and contract costs associated with the construction contract is recognised as revenue and expenses respectively by reference to the stage of completion of the contract activity at the balance sheet date. The outcome of a construction contract can be estimated reliably when all the following conditions are satisfied: 1）Total contract revenue can be measured reliably; 2）It is probable that the economic benefits associated with the contract will flow to the entity; 3）Both the contract costs to complete the contract and the stage of contract completion at the balance sheet date can be measured reliably; and 4 ）The contract costs attributable to the contract can be clearly identified and measured reliably. When the outcome of a construction contract can be estimated reliably, contract revenue and contract costs associated with the construction contract is recognised as revenue and expenses respectively by reference to the stage of completion of the contract activity at the balance sheet date. b) When the outcome of a construction contract cannot be estimated reliably and contract costs are expected to be recoverable, revenue is recognised only to the extent of contract costs incurred that it is 75 probable will be recoverable. Contract costs are recognised as an expense in the period in which they are incurred. Contract costs that are not probable of being recovered are recognised as an expense immediately and no revenue is recognised. c) If the construction contract is interrupted, the Company does not recognise any revenue and gross profit for the current period. If the contract does not recommence in 3 years, gross profit recognized is written off and the 50% of the contract costs is recognized in the third and the other 50% of the contract costs is recognized in the fourth year evently. d) If the accumulative estimated contract costs exceed the contract revenue, an estimated loss should be recognized as an expense during the current financial period. (2) Sale of goods The Company recognises revenue from sale of goods when all the following conditions have been satisfied: a) The Company has transferred to the buyer the significant risks and rewards of ownership of the goods; b) The Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; c) The relevant amount of revenue and costs can be measured reliably; and d) The economic benefits associated with the transaction will flow to the Company (3) Rendering of services: ① Revenue associated with the transaction is recognised by reference to the stage of completion of the transaction at the balance sheet date.The service revenue is recognised at the balance sheet date according to the percentage of completion of the services when (i) the total revenue and total cost can be reliably measured, (ii) the economic benefit pertaining to the service will flow to the Company; (iii) the percentage of completion can be determined reliably. ② When the outcome of the transaction involving the rendering of services cannot be estimated reliably at the balance sheet date, revenue is recognised according to the following: A. When it is probable that the Company will recover the transaction costs incurred, revenue is 76 recognised only to the extent of the expenses recognised that are recoverable. and the costs incurred are recognised as an expense. B. When it is not probable that the costs incurred will be recovered, revenue is not recognised and the costs incurred are recognised as an expense. (4) Revenue arising from the use by others of the Company’s assets Revenue arising from the use by others of the Company’s assets includes interest revenue and royalty revenue. The Company recognised revenue arising from the use by others of the Company’s assets when (a) it is probable that the economic benefits associated with the transaction will flow to the Company and (b) the amount of the revenue can be measured reliably. 17. Accrued costs The Company accrues the extended cost at 2.5% of the actual total production cost over the finished products and charges it into the costs of sales for the period. 18. Income tax The Company adopts the balance sheet liability method for corporate income taxes. (1) Deferred tax asset ① Where there are deductible temporary differences between the carrying amount of assets or liabilities in the balance sheet and their tax bases, a deferred tax asset shall be recognised for all those deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilized. Deferred tax assets should be measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled. ② At the balance sheet date, where there is strong evidence showing that sufficient taxable profit will be available against which the deductible temporary difference can be utilized, the deferred tax asset unrecognized in prior period shall be recognized. ③ The Company assesses the carrying amount of deferred tax asset at the balance sheet date. If it’s 77 probable that sufficient taxable profit will not be available against which the deductible temporary difference can be utilized, the Company shall write down the carrying amount of deferred tax asset, or reverse the amount written down later when it’s probable that sufficient taxable profit will be available. (2) Deferred tax liability A deferred tax liability shall be recognized for all taxable temporary differences, which are differences between the carrying amount of an asset or liability in the balance sheet and its tax base, and measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled. 19. Basis of consolidation (1) Scope of consolidation Consolidated financial statements are included all subsidiaries of the parent. When the parent owns, directly or indirectly through subsidiaries, more than half of the voting power of investee company, the investee company is regarding as subsidiary and included consolidated financial statements. If the parent owns half or less of the voting power of an entity when there is any following condition incurred, the investee company is regarding as subsidiary and included consolidated financial statements. A. power over more than half of the voting rights by virtue of an agreement with other investors; B. power to govern the financial and operating policies of the entity under a statute or an agreement; C. power to appoint or remove the majority of the members of the board of directors or equivalent governing body; D. power to cast the majority of votes at meetings of the board of directors or equivalent governing body and control of the entity is by that board or body. If there is evidence suggesting that no control of investee company exists, the investee company does not be included in the consolidated financial statements. (2) Principle of consolidation 78 The consolidated financial statements are based on the financial statements of individual subsidiaries which are included in the consolidation scope and prepared after adjustment of long-term equity investment under equity method and elimination effect of intragroup transaction . (3) Minority interests The portion of the equity of a subsidiary that are not owned, directly or indirectly through subsidiaries, by the parent is presented as minority interest in the consolidated balance sheet. The portion of the profit or loss of a subsidiary that are not owned, directly or indirectly through subsidiaries, by the parent is presented as minority interest in the consolidated income statement. (4) Excess losses The amount which losses of subsidiaries during the period exceeds the proportion of minority’s obligation is offset minority interest as agreed in the subsidiaries’ association or agreement and minorities have ability to bear the excess losses. Otherwise, the excess losses are offset equity of the parent company. Profits made afterward by subsidiaries are attributable to equity of the parent company before recovery of excess losses. (5) Increase or decrease of the subsidiaries For any subsidiary acquired by the Company through business combination under the common control, when the consolidated balance sheet for the current period are being prepared, the amount at the beginning of the period in the consolidated balance sheet is made corresponding modification. For addition business combination not under common control during the reporting period, the Company makes no adjustment for the the amount at the beginning of the period in the consolidated balance sheet. When disposing subsidiary during the reporting period, the Company makes no adjustment for the amount at the beginning of the period in the consolidated balance sheet. For any subsidiary acquired by the Company through business combination under the common control, when the consolidated income statement for the current period are being prepared, revenue, expense and profit for the period from the beginning of the consolidated period to the year end of the reporting period are included in the consolidated income statement. For addition business combination not under 79 common control during the reporting period, revenue, expense and profit for the period from acquisition date to the year end of the reporting period is included in the consolidated income statement. When disposing subsidiary during the reporting period, revenue, expense and profit for the period from the beginning to the disposal date are included in the consolidated income statement. For any subsidiary acquired by the Company through business combination under the common control, when the consolidated cash flow statement for the current period are being prepared, cashflow for the period from the beginning of the consolidated period to the year end of the reporting period is included in the consolidated cash flow statement. For addition business combination not under common control during the reporting period, cashflow for the period from acquisition date to the year end of the reporting period is included in the consolidated cash flow statement. When disposing subsidiary during the reporting period, cashflow for the period from the beginning to the disposal date is included in the consolidated cash flow statement. 20. There is still no corporation pension plan in this fiscal year. Note 5 Notes of Accounting Policy Change, Accounting Estimate Change and Accounting Error Correction. 1. There is no accounting policy change of the company this fiscal year. 2. There is no accounting estimate change of the company this fiscal year. 3. There is no accounting error correction of the company this fiscal year. Note 6 Taxation 1. The value-added output tax rates are 17% and paid by deducting value added input tax. 2. The business tax rate is 5% of revenue. 3. Urban maintenance and construction tax is 7% of turnover tax payable. 4. Extra charge for education is 3% of turnover tax payable. 5. Non staple food price restraining fund is 1‰ of revenue. 6. Corporate income tax: the corporate income tax rate of the Company is 25%. 80 Note 7 Business combination and consolidated financial statements 1. Subsidiary Details of subsidiaries of the Company as at December 31, 2008 is shown as following: Subsidiaries Registered Nature Registered Principal activities address capital(RMB) ） 1 Obtained by business combination under common control Wuhan Boiler BoYu 586 Manufacturing 19,115,250.00 Packaging, design, and manufacturing Industrial Co., Ltd Wuluo of Mechanical and Electrical products; Rd., processing of metal compenents; design Wuhan and manufacturing of model and mold ； Manufacturing of valve srough casting, steel casting, iron casting, nonferrous metal casting. 2)Obtained by other means except for busniness combination Wuhan Lan Xiang 586 Manufacturing 20,000,000.00 Boiler, energy environmental protection Power Environmental Wuluo products, Steel structures, technology Protection Technology Rd., research of heat energy products and its Company Limited Wuhan accessorial equipment,design, technical Consultancy, technical service, sales of developed products, energy project (non-construction project) Shareholding Voting （ Investment （RMB） Subsidiaries % including right Consolidated indirect control ） % 1)Obtained by business combination under common control Wuhan Boiler BoYu Industrial Co., Ltd 14,249,787.13 90 90 Yes 2)Obtained by other means except for busniness combination Wuhan Lan Xiang Power Environmental Protection 24,984,500.00 95 95 Yes Technology Company Limited 2. Alternations of consolidation scope. (1) There is no new acquired subsidiary in the reporting period. (2) Subsidiaries disposed in the reporting period: ① Details of subsidiary disposed: Registered Net assets at the Name Nature Net profit in 2007 address end of 2007 WuHan WuGuo ZhiXin Environmental Protection 586 Wuluo Manufacturing 2,306,384.01 14,864,168.65 Equipment Road, Wuhan Manufacturing Co., Ltd 81 ② Other information: Net profit (from Original the beginning of Net assets in Alteration Alteration Original Name shareholding the accounting the disposal reason date voting % % period to the date disposal date) WuHan WuGuo ZhiXin Environmental Protection Equipment sold 2008-10-28 51% 51% -9,227,862.13 5,636,306.52 Manufacturing Co., Ltd 3. Details of minority shareholders of subsidiaries Amount of minority Balance after deduction of losses of interest in income subsidiaries during the period exceeding Subsidiary Minority interest statement deducted from the proportion of minority shareholders minority interest from equity of parent company Wuhan Boiler BoYu 1,672,879.38 Industrial Co., Ltd Wuhan Lan Xiang Power 2,079,328.77 Environmental Protection Technology Company Limited Note 7 Notes to the consolidation financial statements (Except for especially indicated, the closing balance and the opening balance refer to the balance at Dec 31, 2008 and Dec 31, 2007 respectively; all amounts are presented in RMB). 1. Cash and cash equivalent Item Closing balance Opening balance Cash 401,400.85 540,326.84 Bank deposit 35,918,973.27 79,591,185.36 Other cash and cash equivalent 11,546,980.51 91,633,735.94 Total 47,867,354.63 171,765,248.14 Foreign currency and exchange rate are disclosed as follows: Closing balance Item Currency Former amount Exchange rate Exchange rate amount Cash RMB 9,593.18 1.00 9,593.18 EUR 40,564.00 9.659 391,807.67 82 Closing balance Item Currency Former amount Exchange rate Exchange rate amount Subtotal 401,400.85 Bank deposit RMB 32,818,701.11 1.00 32,818,701.11 USD 453,607.95 6.8346 3,100,228.89 EUR 4.48 9.659 43.27 Subtotal 35,918,973.27 Other cash and cash equivalents RMB 11,546,980.51 1.00 11,546,980.51 Subtotal 11,546,980.51 Total 47,867,354.63 Opening balance Item Currency Former amount Exchange rate Exchange rate amount Cash RMB 35,222.99 1.00 35,222.99 EUR 47,352.45 10.67 505,103.85 Subtotal 540,326.84 Bank deposit RMB 78,730,946.49 1.00 78,730,946.49 USD 117,259.73 7.30 856,535.42 HKD 3,954.98 0.94 3,703.44 Subtotal 79,591,185.36 Other cash and cash equivalents RMB 91,633,735.94 1.00 91,633,735.94 Subtotal 91,633,735.94 Total 171,765,248.14 2. Notes receivable Category Closing balance Opening balance Bank acceptance 380,000.00 136,760,360.00 Total 380,000.00 136,760,360.00 83 3. Accounts receivable (1) Aging analysis of accounts receivable is as following ： Closing balance Aging Amount Proportion Provision for bad debt （ Within 1 year including 1 year ） 456,643,635.25 42.11% 10,031,364.30 （ 1-2 years including 2 years） 158,077,327.27 14.58% 4,742,319.82 2-3 years（including 3 years） 310,731,902.22 28.65% 37,559,914.13 3-4 years（including 4 years） 52,370,931.36 4.83% 10,474,186.27 4-5 years（including 5 years） 54,666,261.20 5.04% 16,084,148.34 Above 5 years 51,926,411.09 4.79% 51,926,411.09 Total 1,084,416,468.39 100.00% 130,818,343.95 Opening balance Aging Amount Proportion Provision for bad debt （ Within 1 year including 1 year ） 221,614,875.41 24.31% 6,064,012.60 （ 1-2 years including 2 years） 479,856,639.82 52.64% 40,429,799.19 2-3 years（including 3 years） 84,281,380.21 9.25% 9,647,342.82 3-4 years（including 4 years） 60,745,168.20 6.66% 20,501,271.34 4-5 years（including 5 years） 32,620,894.15 3.58% 19,513,089.86 Above 5 years 32,462,745.07 3.56% 32,462,745.07 Total 911,581,702.86 100.00% 128,618,260.88 (2) Accounts receivable shown by categories ： Closing balance Category Amount Proportion Provision for bad debt Major single amount 420,133,703.02 38.74% 22,923,600.00 Minor single amount with high risk in 51,926,411.09 4.79% 51,926,411.09 combination as per credit feature Other minor accounts receivable 612,356,354.28 56.47% 55,968,332.86 Total 1,084,416,468.39 100.00% 130,818,343.95 84 Opening balance Category Amount Proportion Provision for bad debt Major single amount 289,227,647.50 31.73% 8,622,795.75 Minor single amount with high risk 32,462,745.07 3.56% 32,462,745.07 in combination as per credit feature Other minor accounts receivable 589,891,310.29 64.71% 87,532,720.06 Total 911,581,702.86 100.00% 128,618,260.88 (3) Major single amount or minor single amount with individually impairment test on the closing balance: Item Amount Provision for bad Proportion Reason debt Product payment of 23,868,100.00 5,055,286.00 21.18% Because the company has to bear the Shuangyashan later expenditure, probably the AR thermoelectric power won’t be collected outright. project Product payment of 8,660,000.00 2,598,000.00 30.00% Because the mony-collected contract project in Zouping, hasn’t been implemented, probably Shandong the AR won’t be collected outright. Product payment of 9,580,000.00 2,874,000.00 30.00% Because the mony-collected contract project in Huineng, hasn’t been implemented completely, Sanmenxia probably the AR won’t be collected outright. Product payment of 14,325,000.00 4,297,500.00 30.00% The company has been sent project in Zhongmai, collection-letters many times, but no Henan, any responses. Probably the AR won’t be collected outright. Product payment of 13,750,000.00 4,605,000.00 33.49% Because the mony-collected contract project in Hebin, hasn’t been implemented completely, Ningxia probably the AR won’t be collected outright. Product payment of 47,970,000.00 14,391,000.00 30.00% The client hasn’t received the special project in Zhenxing, appropriation fund, probably the AR Shanxi won’t be collected outright. Quality bond 2,367,995.12 2,367,995.12 100.00% The quality bond has been over 3 years. It is difficult to return it. Total 120,521,095.12 36,188,781.12 (4) Other information of accounts receivable ： 85 A. Major single amount is accounts receivable with significant balance of the Company (Top 5 account receivable); or Minor single account receivable with high risk in combination as per credit feature is defined as single minor accounts receivable with aging over 5 years. B. In 2008, management of the company increased money-collection power. Financial department, customer department, sales department, project bidding department, and project management department gave full cooperation to collect money and coordinated by the Chief Manager. At the end of 2008, corporation had collected arrears with aging over 5 years amounted RMB 4,331,160.00, which was13% of account receivables with aging 5 years in the last fiscal year. C. The account receicable with aging over 5 years amount RMB 1,942,965.00and the uncollectable construction delivery fees amount RMB 711,600.00 have been wrote off. D. There is amount of RMB 44,119,317.50 due from Wuhan Boiler (Group) Co., Ltd holding 6.91% of the voting shares of the Company at the end of the period. E. The details of the top 5 accounts receivable ： Company Amount Proportion Occurrence year Weiqiao Textile Company Limited (Group) 126,740,000.00 11.58% 2003 -2007 ， PTINDAHKIATULP&PAPER TBK(indonesia) 116,783,703.02 10.67% 2008 Shanxi Datang International Yungang Thermal Power Co.Ltd 67,440,000.00 6.16% 2008 Guangxi Xinfa Aluminium Co.Ltd 61,200,000.00 5.59% 2008 Shanxi Zhenxin (Group) Co., Ltd 47,970,000.00 4.38% 2006 Total 420,133,703.02 38.40% F. There is related transaction amount of RMB 77,776,450.3. It is 7.17% of total account receivable. (5) Accounts receiviable listed by foreign currency: Items Ending balance Currency Amount Foreign exchange rate RMB amount Acounts receiviable RMB 981,897,468.39 1.00 981,897,468.39 USD 15,000,000.00 6.8346 102,519,000.00 total 1,084,416,468.39 86 ． 4 Prepayment (1) Aging analysis of prepayment is as following ： Closing balance Opening balance Aging Amount Proportion Amount Proportion （ Within 1 year including 1 year ） 139,116,204.67 98.06% 153,666,778.38 98.74% （ 1-2 years including 2 years） 2,747,500.70 1.94% 1,947,075.69 1.25% 2-3 years（including 3 years） 0.00% 13,000.00 0.01% Above 3 years 0.00% 1,503.32 0.00% Total 141,863,705.37 100.00% 155,628,357.39 100.00% (2) Information of prepayment ： A. The prepayments with aging over 1 year are unsettlement of diffusion purchases. B. Prepayment not including debt due to companies holding less 5% (including 5%) of shares. C. Not including the amount more than 30% (including 30%) of prepayment. (3) Accounts receiviable listed by foreign currency: Items Ending balance Currency Amount Foreign exchange rate RMB amount Prepayment RMB 126,643,816.05 1.00 126,643,816.05 USD 2,226,888.16 6.8346 15,219,889.32 total 141,863,705.37 Items opening balance Currency Amount Foreign exchange rate RMB amount Prepayment RMB 155,043,989.39 1.00 155,043,989.39 USD 80,000.00 7.3046 584,368.00 total 155,628,357.39 87 5. Other receivables (1) Aging analysis of other receivables is as following ： Closing balance Aging Amount Proportion Provision for bad debt （ Within 1 year including 1 year ） 132,814,276.25 98.95% 718,081.86 （ 1-2 years including 2 years） 85,600.00 0.06% 2,568.00 2-3 years（including 3 years） 784,200.00 0.58% 47,050.00 Above 5 years 534,775.00 0.41% 534,775.00 Total 134,218,851.25 100.00% 1,302,474.86 Opening balance Aging Amount Proportion Provision for bad debt （ Within 1 year including 1 year） 1,145,999.28 44.54% 34,379.98 2-3 years（including 3 years） 892,007.80 34.66% 26,760.23 3-4 years（including 4 years） 535.15 0.02% 32.11 Above 5 years 534,775.00 20.78% 534,775.00 Total 2,573,317.23 100.00% 595,947.32 (2) Other receivables shown by categories ： Closing balance Category Amount Proportion Provision for bad debt Major single amount 130,715,211.73 97.39% 416,757.83 Minor single amount with high risk in 534,775.00 0.40% 534,775.00 combination as per credit feature Other minor other receivables 2,968,864.52 2.21% 350,942.03 Total 134,218,851.25 100.00% 1,302,474.86 88 Opening balance Category Amount Proportion Provision for bad debt Minor single amount with high risk in 534,775.00 20.78% 534,775.00 combination as per credit feature Other minor other receivables 2,038,542.23 79.22% 61,172.32 Total 2,573,317.23 100.00% 595,947.32 (3) Major single amount or minor single amount with individually impairment test on the closing balance: Provision for Item Amount Proportion Reason bad debt 3RC Comppany Limited 336,604.05 336,604.05 100.00% The company went bankrupt. Total 336,604.05 336,604.05 (4) Other information of other receivables ： A. Minor single amount with high risk in combination as per credit feature is defined as minor single other receivables with aging over 5 years. B. There is amount of RMB 5, 886, 298, 32 due from Wuhan Boiler (Group) Co., Ltd holding 6.91% of the voting shares of the Company at the end of the period. C. The details of the top 5 other receivables ： Item Amount Proportion Occurrence Nature and details year Value-added tax for export 115,144,245.10 85.54% 2008 Tax unsettled Wu han east-lake high-tech 7,500,000.00 5.68% 2008 Supporting development zone infrastructure payment Wuhan Boiler (Group) Co., 5,886,298.32 4.46% 2008 Group transaction, Ltd value-added tax for waiting for export drawback Export value-added tax 1,679,039.08 1.27% 2007 Subrogate drawback of tax Petty cash 505,629.23 0.38% 2008 Daily fund Total 128,429,650.67 97.33% 89 D. The amount of related party receivables is RMB 5,999,888.03. It is 4.55% of other account receivable. 6. Inventories (1) Inventories ： Categories Opening balance Increase Decrease Closing balance Include: Percentage of Capitalized reversed provision amounts of for impairment loss borrowing costs in closing balance Raw 295,404,333.88 1,052,025,329.57 1,011,110,396.77 336,319,266.68 materials construction 846,954,446.12 3,911,748,815.23 3,988,324,946.45 770,378,314.90 projects Finished 6,067,266.17 16,375,707.95 12,017,151.66 10,425,822.46 products Circulating 1,059,514.79 4,848,021.91 5,446,000.22 461,536.48 Materials Purchased 715,085.32 1,161,077,945.17 1,161,793,030.49 goods Total 1,150,200,646.28 6,146,075,819.83 6,178,691,525.59 1,117,584,940.52 (2) Provision for impairment of inventories ： Decrease Basis of Category Opening balance Provision Trans Closing balance provision for Amount written ferred impairment off back Raw 9,678,126.70 37,295,388.02 46,973,514.72 Decline in materials quality of raw material Contruction 129,112,358.43 120,165,557.65 95,438,048.58 153,839,867.50 project Total 138,790,485.13 157,460,945.67 95,438,048.58 200,813,382.22 7. Fixed assets (1) The details of the fixed assets are shown as following ： Item Opening Increase Decrease Closing balance balance 1 、Cost 475,450,299.65 13,335,856.46 39,320,786.83 449,465,369.28 Including ：Property and 172,567,323.32 5,604,453.37 166,962,869.95 building General machinery 223,352,662.99 4,198,137.99 19,477,160.92 208,073,640.06 90 Item Opening Increase Decrease Closing balance balance Specific machinery 57,823,690.69 2,213,980.92 55,609,709.77 Vehicle 13,326,166.84 216,403.00 2,738,313.03 10,804,256.81 Electronic and office 8,380,455.81 8,921,315.47 9,286,878.59 8,014,892.69 equipment 、 2 Accumulated depreciation 320,051,747.61 21,603,947.64 20,998,522.35 320,657,172.90 Including ：Property and 100,217,867.98 5,031,223.94 4,209,153.50 101,039,938.42 building General machinery 160,122,024.26 12,578,855.11 11,351,922.80 161,348,956.57 Specific machinery 46,350,628.37 1,705,893.76 832,751.31 47,223,770.82 Vehicle 9,025,631.23 1,002,590.00 1,494,168.20 8,534,053.03 Electronic and office 4,335,595.77 1,285,384.83 3,110,526.54 2,510,454.06 equipment 、 3 Provision for impairment of 7,037,916.44 80,890.88 6,957,025.56 fixed assets Including: Property and building General machinery 6,375,924.54 70,099.27 6,305,825.27 Specific machinery 96,310.53 1,996.00 94,314.53 Vehicle 429,869.43 429,869.43 Electronic and office 135,811.94 8,795.61 127,016.33 equipment 、 4 Carrying amount of fixed 148,360,635.60 -8,268,091.18 18,241,373.60 121,851,170.82 assets Including: Property and 72,349,455.34 -5,031,223.94 1,395,299.87 65,922,931.53 building General machinery 56,854,714.19 -8,380,717.12 8,055,138.85 40,418,858.22 Specific machinery 11,376,751.79 -1,705,893.76 1,379,233.61 8,291,624.42 Vehicle 3,870,666.18 -786,187.00 1,244,144.83 1,840,334.35 Electronic and office 3,909,048.10 7,635,930.64 6,167,556.44 5,377,422.30 equipment 91 (2) The details of construction in progress transferred to fixed assets: Projects and equipments are RMB 4,755,262.46. 8. Construction in progress The detail of the construction in progress is shown as following ： Capitalised Opening Transferred to Project Increase Other decrease Closing balance interest balance fixed assets rate 1. Newly established 35,655,954.93 283,814,765.49 41,721,002.63 277,749,717.79 base for the company: Including: Capitalized amount of borrowing 7,133,219.75 7,133,219.75 costs 2. equipment for New 182,764.01 94,276,879.76 94,459,643.77 base for the Company including: Capitalized amount of borrowing 2,601,256.45 2,601,256.45 costs 3. Project and 942,313.00 38,743,600.96 4,755,262.46 794,153.00 34,136,498.50 equipment component 4. Rockover table 10,440.00 10,440.00 Total 36,791,471.94 416,835,246.21 4,755,262.46 42,525,595.63 406,345,860.06 Including ： Capitalized amount of 9,734,476.20 9,734,476.20 borrowing costs Project Budget Financial source % of budget Newly established base for the company: 450,000,000.00 Self-prepare capital, loan 69 equipment for New base for the Company 400,000,000.00 Self-prepare capital, loan 24 Total 850,000,000.00 9. Intangible asset (1) The variety of intangible assets is shown as following ： Item Opening balance Increase Decrease Closing balance 1. Cost 58,041,348.75 49,163,928.01 1,161,942.34 106,043,334.42 ①The fabrication cold work technique of 16,800,000.00 16,800,000.00 boiler drum ②The technique of culm slurry 11,500,000.00 11,500,000.00 alkali-recycled boiler ③Circulating fluidized bed technique 17,816,457.75 721,142.34 17,095,315.41 92 Item Opening balance Increase Decrease Closing balance ④600MW recycle boiler technology 11,504,891.00 11,504,891.00 ⑤Land-use right for new plant 41,666,503.00 41,666,503.00 ⑥Administration system software 420,000.00 7,497,425.01 440,800.00 7,476,625.01 2. Accumulated amortization 36,265,093.83 5,583,836.07 150,500.00 41,698,429.90 ①The fabrication cold work technique of 16,800,000.00 16,800,000.00 boiler drum ②The technique of culm slurry 9,396,487.67 1,326,412.92 10,722,900.59 alkali-recycled boiler ③Circulating fluidized bed technique 5,542,897.96 915,332.04 6,458,230.00 ④ 600MW recycle boiler technology 4,410,208.20 1,150,489.08 5,560,697.28 ⑤Land-use right for new plant 555,553.36 555,553.36 ⑥Administration system software 115,500.00 1,636,048.67 150,500.00 1,601,048.67 3. Carrying amount of intangible assets 21,776,254.92 43,580,091.94 1,011,442.34 64,344,904.52 ①The fabrication cold work technique of boiler drum ②The technique of culm slurry 2,103,512.33 -1,326,412.92 777,099.41 alkali-recycled boiler ③Circulating fluidized bed technique 12,273,559.79 -915,332.04 721,142.34 10,637,085.41 ④ 600MW recycle boiler technology 7,094,682.80 -1,150,489.08 5,944,193.72 ⑤Land-use right for new plant 41,110,949.64 41,110,949.64 ⑥Administration system software 304,500.00 5,861,376.34 290,300.00 5,875,576.34 10. Other long-term assets Item Closing balance Opening balance Long-term deferred expense 100,000.00 250,000.00 Other non-current assets 6,174,943.43 Total 6,274,943.43 250,000.00 (1) The detail of the large amounts of Other Non-current assets: Item Closing balance Nature or content Hedging implement 6,174,943.43 Long-term foreign exchange transaction (2) The detail of the large amounts of long-term deferred expenses ： Item Closing balance Opening balance Nature or content Co-construction 100,000.00 250,000.00 Expenditure of special substation substation construction 93 11. Deferred tax assets and liabilities (1) Temporary difference Temporary difference Item Closing balance Opening balance 1. Deductable temporary difference ① Provision for bad debt 132,120,818.81 129,214,208.20 ② Provision for loss of inventories impairment 200,813,382.22 138,790,485.13 ③ Provision for loss of fixed assets impairment 6,957,025.56 7,037,916.44 Total 339,891,226.59 275,042,609.77 2. taxable temporary difference ① Donation 10,786.04 10,786.04 Total 10,786.04 10,786.04 ： (2) Recognized deferred tax assets and liabilities Item Closing balance Opening balance 1. Deferred tax assets ① Provision for bad debt 21,988,370.31 21,240,807.20 ② Provision for loss of inventories impairment 50,203,345.56 34,697,621.28 ③ Provision for loss of fixed assets impairment 1,739,256.39 1,759,479.11 Total 73,930,972.26 57,697,907.59 2. Deferred tax liabilities ① Donation 2,696.51 2,696.51 Total 2,696.51 2,696.51 (3) The amount can be deducted the difference between individually test and provision for 100% bad debt of account receivable of unrecognized deferred tax assets is RMB 44,167,337.55. The deductible loss is RMB538,419,815.10, including the amount of RMB 236,399,033.26 dues in Dec12th of 2012 and the amount of RMB 302,020,781.84 dues in Dec12th of 2013. 94 12. Provision for impairment of assets Decrease Provided during Categories Opening balance Transferred Amount Closing balance the year back written off 1. Provision for bad 129,214,208.20 5,727,274.08 166,098.41 2,654,565.06 132,286,917.22 debt Including ： 128,618,260.88 5,016,892.68 162,244.55 2,654,565.06 130,818,343.95 ①． Provision for bad debt of accounts receivable ②．Provision for bad 595,947.32 710,381.40 3,853.86 1,302,474.86 debt of other receivables 2. Provision for loss of 138,790,485.13 157,460,945.67 95,438,048.58 200,813,382.22 inventories impairment 3. Provision for loss of 7,037,916.44 80,890.88 6,957,025.56 fixed assets impairment Total 275,042,609.77 163,188,219.75 166,098.41 98,173,504.52 339,891,226.59 13. Short-term loan Category Closing balance Opening balance Credit borrowings 954,000,000.00 776,500,000.00 Guarantee borrowings 2,900,000.00 Entrust borrowings 970,000,000.00 Total 1,924,000,000.00 779,400,000.00 Note: the entrust borrowings are supplies by Alstom (China) Investment Co., Ltd, and the maximun amount is RMB13,000,000,000.00. 14. Notes payable Category Closing balance Opening balance Amount due in next accounting period Bank acceptance 419,917,469.28 646,290,009.40 419,917,469.28 Commercial 13,731,756.70 73,550,000.00 13,731,756.70 acceptance Total 433,649,225.98 719,840,009.40 433,649,225.98 95 15. Accounts payable Item Closing balance Opening balance Amount 532,731,198.18 455,383,537.42 A. There was no accounts payable due to shareholders holding over 5% of the voting shares of the Company. B. Accounts payable listed by foreign currency: Items Ending balance Currency Amount Foreign exchange rate RMB amount Accounts payable RMB 126,643,816.05 1.00 521,875,564.32 EUR 421,779.00 9.659 4,074,156.54 USD 999,227.39 6.8346 6,781,477.32 total 532,731,198.18 Items opening balance Currency Amount Foreign exchange rate RMB amount Accounts payable RMB 155,043,989.39 1.00 444,264,538.68 EUR 285.305.00 10.6669 3,043,319.90 USD 1,105,560.72 7.3046 8,075,678.84 total 455,383,537.42 16. Advanced from customers Item Closing balance Opening balance Amount 10,442,136.73 170,572,080.73 ： Note A.There was no advanced from customers due to shareholders holding over 5% of the voting shares of the Company. B. Advanced from customers, including amount of RMB333,000.00 with aging over 1 year, was unsettled contract payments on construction in progress. According to the Company’s accounting method of contract on construction in progress, the account shall be carried forward after the settlement of contract payments on construction in progress. 96 17. Payroll payable Opening Closing Item Increase Decrease balance balance 1.Salary,bonus, allowance, 11,120,714.17 98,569,119.80 97,551,235.22 12,138,598.75 subsidy 2. Employee welfare 31,043.56 3,361,501.93 3,361,501.93 31,043.56 3.Social insurance 29,727.71 24,677,054.34 24,677,054.34 29,727.71 including ：①Medical insurance - 6,266,911.44 6,266,911.44 ②Retirement pension 23,461.47 15,830,843.40 15,830,843.40 23,461.47 ③Unemployment insurance 6,266.24 1,650,010.31 1,650,010.31 6,266.24 ④On－job injures insurance 533,378.08 533,378.08 ⑤Fertility insurance 395,911.11 395,911.11 4. Housing fund 45,420.00 8,385,792.00 8,431,212.00 - 5. Labor union expenditure and 4,250,004.74 3,865,930.95 5,180,048.60 2,935,887.09 employee education expenses 6. Non －monetary benefit 7. Others 32,010,478.00 1,201,884.04 3,357,753.39 29,854,608.65 ： including Share payment in cash Total 47,487,388.18 140,061,283.06 142,558,805.48 44,989,865.76 18. Taxes payable Taxes Closing balance Opening balance 1．Value-added tax -104,727,763.16 -8,364,815.95 2．Business tax 26,289.26 177,678.93 3．Corporation income tax 363,748.50 2,248,127.30 4．Stamp Tax 401,578.65 1,500,604.69 5．Extra charge for education -125.83 1,917,511.84 6．Urban maintenance and construction tax -293.60 2,832,138.07 7．Housing property tax 470,009.32 2,463,037.82 97 Taxes Closing balance Opening balance ． 8 Personal income tax 428,538.54 462,117.95 9．City levee fee -83.89 2,570,516.62 10．Non staple food price restraining fund 1,221.28 6,470,981.93 11．Local education development fee 125,162.68 6,229,543.53 Total -102,911,718.25 18,507,442.73 Note: A. The reason of the decrease of taxes payable this year: Decrease of sell and increase of cost lead to input taxes are more than output taxes. There are no turnover tax and associate. B. The detail of taxation standard has listed in Note 6. 19. Dividend payable Closing Reason of failure Main invester balance payment Harbin Institute of Technology Power Engineering High 108,000.00 Unpaid dividend Technology Co., Ltd Xi’an Jiaotong University Xing Yuan Power Technology 166,000.00 Unpaid dividend Development Co., Ltd Shanghai Power Generation Equipment Design Institution 144,000.00 Unpaid dividend Wuhan Urban Environment Protection Project Technology Co., 144,000.00 Unpaid dividend Ltd total 562,000.00 ． 20 Other payables Item Closing balance Opening balance Amount 25,258,271.32 14,856,974.17 Note: A. There is amount of RMB 11,499,926.80 due from Wuhan Boiler (Group) Co., Ltd holding 6.91% of the voting shares of the Company at the end of the period. B. other payables increased by 70%, because the payables of related shareholder are increased. 98 21.Non-current liabilities due in one year (1) Details information of Non-current liabilities due in one year Category Closing balance Opening balance Long-term loan 90,000,000.00 total 90,000,000.00 Credit borrowings 90,000,000.00 total 90,000,000.00 Note: details information of long-term loan due in one year Interest Overdue Overdue Repayment bank amount purpose ratio date reason date Bank of Communications Wuhan Branch Wuchang 90,000,000.00 5.58% business no Subbranch total 90,000,000.00 22.Long-term borrowings (1) The classification of long-term borrowings ： Item Closing balance Opening balance Credit loan 100,000,000.00 160,000,000.00 Total 100,000,000.00 160,000,000.00 (2) The detailed information of long-term borrowings: Lender Amount Bank of Communications Wuhan Branch Wuchang Subbranch 100,000,000.00 Total 100,000,000.00 23.Other non-current liabilities 99 (1) The detailed information of other non-current liabilities: item Closing balance Opening balance Deferred revenue 13,703,616.00 Hedging-trade 6,942,506.33 total 20,646,122.33 (2) The information of major amount items: the deferred recenue is the land fund receiveded according to the rulls of share rights transferring agreement (SPA). 24. Share capital Unit: share Before current alternation Movement during the year (+,-) After current alternation Issuan Category Proportion Reserves Proportion Numbers of ce of Bonus Numbers of fund Others Subtotal share capital (%) new shares share capital (%) transfer shares I. Unlisted shares 172,000,000 57.91 172,000,000 57.91 1. Sponsors' shares 172,000,000 57.91 172,000,000 57.91 including: -State owned shares Shares held by 20,530,000 6.91 20,530,000 6.91 domestic legal persons Shares held by 151,470,000 51 151,470,000 51 overseas legal persons Others 2. Raised shares held by legal persons 3. Shares held by employees 4.Preference shares and others II. Listed shares 1. 125,000,000 42.09 125,000,000 42.09 RMB-denominated ordinary shares 2. Domestically listed foreign shares 3.Overseas listed 125,000,000 42.09 125,000,000 42.09 foreign shares 4. Others III.Total shares 100 25.Capital surplus Opening Closing Item Increase Decrease balance balance Capital premium 145,104,615.24 194,896.66 144,909,718.58 Other capital surplus 29,749,688.88 29,749,688.88 Including: Transfer from items under 29,749,688.88 29,749,688.88 previous accounting standard Total 174,854,304.12 194,896.66 174,659,407.46 Note: the capital surplus is decrease, because the difference between the purchase price of 20% shares of Wuhan Lan Xiang Power Environmental Protection Technology Company Limited and net assets is deducted. 26.Surplus reserve item Opening balance Increase Decrease Closing Balance Legal surplus 39,418,356.83 39,418,356.83 Total 39,418,356.83 39,418,356.83 27.Retained earnings Amount Opening balance of retained earning before adjusments -375,432,508.86 Adjustments on opening balance of retained earning Opening balance of retained earning after adjusments -375,432,508.86 Plus: net profit for the year -353,934,337.61 Less: Ordinary share dividends payable -729,366,846.47 28.Revenue (1) The details of the revenue are shown as following ： Item 2008 2007 ． 1 Operating income 1,114,599,428.80 1,757,664,156.56 2．Other operating income 6,471,823.32 12,708,724.91 Total 1,121,071,252.12 1,770,372,881.47 101 (2) Segment information is shown as following ： Business segment Operating income Operating cost Operating profit 1．Sales of boiler products 1,112,491,428.80 1,105,865,930.50 6,625,498.30 2．Technical service 2,108,000.00 2,746,165.05 -638,165.05 Total 1,114,599,428.80 1,108,612,095.55 5,987,333.25 * The Company’s sales to the top five customers for the year amount to RMB 749,433,599.21 which accounts for 67.24% of the total revenue. (3) Relevant information of construction contracts: Recognised profits to Construction costs Project Total amount date (recognised losses Progress billings incurred to date as negative figure) Fixed price construction 4,589,249,672.50 2,542,157,782.08 -184,392,740.77 1,587,386,726.41 contract * Estimated total costs of certain construction contracts exceed the estimated total revenue mainly because of price increase of raw materials and so on. The Company recognises the excess amount of RMB 120,165,557.65 as estimated loss. 29. Tax and associate charge Item 2008 2007 Business tax 497,558.67 753,986.77 Urban maintenance and construction tax 2,410,599.68 4,393,061.68 Education fee and associate charge 90,7189.7 1,882,740.74 Embankment fee 571,344.47 1,255,100.60 Non staple food price restraining fund -285,386.61 1,823,585.77 Local education development fee 1,127,432.52 1,288,537.69 Total 5,228,738.43 11,397,013.25 Note: The detail of taxation standard has listed in Note 6. 30. Sales expenses Sales expense of the period amounted RMB 6,198,590.04 is 79% less than prior year and the decreased amount id RMB 23,667,970.92, which is due to decrease of entertain fees, salaries and consultation fees. Entertain fees decreased by RMB 2,824,283.72, salaries decreased by RMB 8,228,867.93, and 102 consultation fees decreased by RMB 9,100,920.00. 31. Finance expenses Finanical expenses of the period amounted RMB 96,508,269.91 is 49.42% higher than prior year, which is mainly due to additional interest payment associated resulting from increase of borrowings. 32. Impairment losses 2008 2007 1. Impairment loss of bad debts 5,727,274.08 38,888,250.88 2. Impairment loss of inventories 157,460,945.67 134,391,073.68 3. Impairment loss of fixed assets 6,252,141.00 Total 163,188,219.75 179,531,465.56 33.Fair value gains source 2008 2007 Hedging-trade -1,015,005.38 total -1,015,005.38 34.Investment yield source 2008 2007 long-term equity investment (lose “-”) -1,354,516.32 financial assets held for trading 321,946.87 total -1,354,516.32 321,946.87 35.Non-operating gains 2008 2007 ． 1 Gain on disposal of non-current assets 1,704,565.68 214,624.79 ： including Gain on disposal of fixed assets 1,704,565.68 214,624.79 2. Government grant 2,300,000.00 3.others 8,964,914.34 112,379.74 Total 10,669,480.02 2,627,004.53 103 Note: others of non-operating gains include: A. the amount of writtenoff over 5yrs advance receivable is RMB 5,371,726.77. B. the amount of writtenoff unpayable is RMB 2,440,891.00. 36.Non-operating losses 2008 2007 1．Loss on disposal of non-current assets 2,173,657.31 1,704,548.03 including：Loss on disposal of fixed assets 1,904,157.31 1,704,548.03 269,500.00 2. Extraordinary losses – amercement and overdue fine 397,823.32 642,205.24 3. Non-profit donation contribution 20,000.00 5,000.00 Total 2,513,546.21 2,351,753.27 37.Income tax expense 2008 2007 Current income tax expense 1,337,473.31 3,412,342.76 Add: Deferred income tax -16,233,064.67 -46,843,120.69 Income tax expense -14,895,591.36 -43,430,777.93 38.Earning per share item 2008 2007 Basic earning per share -1.19 -1.62 Diluted earning per share -1.19 -1.62 39.Relevant information about cash flow statement (1) Other cash received from operating activities 2008 2007 Other cash received from operating activities 25,001,439.42 9,935,574.69 Including: significant items Subsidies for early-retired and retired employees from 19,964,569.00 Wuhan Boiler (Group) Co., Ltd 104 2008 2007 Collection of money advanced for others 837,154.11 9,935,574.69 Returned petty cash 1,787,336.57 Discounted interest funded by government 2,300,000.00 Compensation income 112,379.74 (2) Other cash paid from operating activities 2008 2007 Other cash paid relating to operating activities 37,121,932.48 59,401,277.15 Including: significant items Utility expenses 2,997,944.44 4,321,754.04 Audit fees 1,235,761.32 1,550,000.00 Laboratory examination expenses 1,702,634.98 Overseas travelling expenses 1,340,234.85 Consulting fees 3,418,418.05 9,323,089.77 Business administration expenses and company funds 3,214,741.81 2,012,639.98 Rental expense 12,273,812.06 Business entertainment expenses 2,499,576.40 6,253,682.26 Travelling expense 5,647,705.27 4,331,606.60 Office expenses 3,764,476.28 2,397,250.84 Insurance expenses 4,556,791.89 590,511.94 Other expenses 9,772,543.02 13,304,059.83 (3) Other cash received from financing activities 2008 2007 OtherCash received from financing activities 81,491,563.01 78,664,866.94 Including: finance income except for interest expenses 1,407,371.46 3,242,766.10 Decrease of guarantee deposits and fixed deposits 80,084,191.55 75,422,100.84 105 (4) Other cash paid from financing acticities 2008 2007 Other cash paid from financing acticities 2,757,704.48 Including: bank charges 2,736,034.53 (5) Supplementary information of cash flow statement Supplementary information 2008 2007 1. Reconciliation of net profit to net cash flows generated from operations ： Net profit -357,672,762.06 -478,262,995.78 Provision for impairments of assets. 67,038,571.17 179,531,465.56 Depreciation of fixed assets, oil-gas assets and productive 23,135,148.47 24,744,652.49 biological assets Amortization of intangible assets 5,583,836.07 5,365,925.12 Amortization of long-term deferred expense 150,000.00 2,987,500.00 Losses/gains on disposal of property, plant and equipment, 468,591.63 1,475,809.82 intangible asset and other long-term assets (gains: negative) Losses/gains on disposal of fixed assets (gains: negative) 14,213.42 Losses/gains from variation of fair value (gains: negative) 1,015,005.38 Finance cost (income: negative) 96,048,416.25 64,347,778.18 Investment loss (gains: negative) 1,354,516.32 -321,946.87 Decrease in deferred tax assets (increase: negative) -16,233,064.67 -46,842,257.81 Increase in deferred tax liabilities (decrease: negative) -862.88 Decrease in inventory (increase: negative) 25,007,464.96 -334,708,398.10 Decrease in accounts receivable from operating activities -170,510,839.42 569,826,298.49 (increase: negative) Increase in payables from operating activities (decrease: -504,974,681.90 -78,091,231.21 negative) Others Net cash flows generated from operating activities -829,589,797.80 -89,934,049.57 106 Supplementary information 2008 2007 2. Significant investing and financing activities without involvement of cash receipts and payments Debt converted to capital Convertible bonds due within 1 year Finance leased fixed assets 3. Movement of Cash and cash equivalent Closing balance of Cash 37,612,024.12 81,425,726.08 Less: opening balance of cash 81,425,726.08 103,894,894.26 Plus: closing balance of cash equivalent Less: opening balance of cash equivalent Net increase in cash and cash equivalents -43,813,701.96 -22,469,168.18 (6) The information of subsidiaries and other companies acquired or disposed in current fiscal year: Item Amount Information of subsidiaries and other companies disposed: 1. Disposal price: 1,520,000.00 2. Cash or cash equivalent received 1,520,000.00 Less: cash or cash equivalent holding by the subsidiaries and other companies 1,132,938.43 3. Net cash and cash equivalent: 387,061.57 4. Net assets of the subsidiaries and other companies 5,636,306.52 Current assest: 13,147,358.75 Non-current assest: 8,501,946.41 Current liability: 16,012,998.64 Non-current liability: (7) Cash and cash equivalent ： Item 2008 2007 1. Cash 107 Item 2008 2007 Including: Cash on hand 401,400.85 540,326.84 Bank deposit on demand 35,918,973.27 79,591,185.36 Other cash and cash equivalents on demand 1,291,650.00 1,294,213.88 2. Cash equivalent Including: bond investments due in three months 3. Closing balance of cash and cash equivalents 37,612,024.12 81,425,726.08 Including: Restricted cash and cash equivalents in parent company or subsidiaries in the group Note 8 Notes of financial statements of parent company 1. Accounts receivable (1) The aging analysis of accounts receivable ： Closing balance Aging Amount Proportion Provision for bad debt ） Within 1 year (including 1 year 450,207,778.83 41.99% 9,838,288.60 1-2 years（including 2 years） 155,319,622.69 14.49% 4,659,588.68 2-3 years（including 3 years） 309,443,598.19 28.86% 37,482,615.89 3-4 years（including 4 years） 51,682,000.00 4.82% 10,336,400.00 4-5 years（including 5 years） 54,666,261.20 5.10% 16,084,148.34 Above 5 years 50,893,321.09 4.75% 50,893,321.09 Total 1,072,212,582.00 100.00% 129,294,362.60 Opening balance Aging Amount Proportion Provision for bad debt ） Within 1 year (including 1 year 211,133,424.30 23.60% 5,749,569.06 1-2 years（including 2 years） 476,558,313.82 53.25% 40,330,849.42 2-3 years（including 3 years） 83,241,553.05 9.30% 9,584,953.18 3-4 years（including 4 years） 60,745,168.20 6.79% 20,501,271.34 108 Opening balance Aging Amount Proportion Provision for bad debt （ 4-5 years including 5 years ） 30,663,565.42 3.43% 19,121,624.11 Above 5 years 32,462,745.07 3.63% 32,462,745.07 Total 894,804,769.86 100.00% 127,751,012.18 (2) Accounts receivable shown by categories ： Closing balance Category Amount Proportion Provision for bad debt Major single amount 420,133,703.02 39.18% 22,923,600.00 Minor single amount with high risk in 50,893,321.09 4.75% 50,893,321.09 combination as per credit feature Other minor accounts receivable 601,185,557.89 56.07% 55,477,441.51 Total 1,072,212,582.00 100.00% 129,294,362.60 Opening balance Category Amount Proportion Provision for bad debt Major single amount 289,227,647.50 32.32% 8,622,795.75 Minor single amount with high risk in 32,462,745.07 3.63% 32,462,745.07 combination as per credit feature Other minor accounts receivable 573,114,377.29 64.05% 86,665,471.36 Total 894,804,769.86 100% 127,751,012.18 (3) Major single amount or minor single amount with individually impairment test on the closing balance: Item Amount Provision for Proportion Reason bad debt Product payment 23,868,100.00 5,055,286.00 21.18% Because the company has to bear of Shuangyashan the later expenditure, probably the thermoelectric AR won’t be collected outright. power project 109 Item Amount Provision for Proportion Reason bad debt Product payment 8,660,000.00 2,598,000.00 30.00% Because the mony-collected of project in contract hasn’t been implemented, Zouping, probably the AR won’t be Shandong collected outright. Product payment 9,580,000.00 2,874,000.00 30.00% Because the mony-collected of project in contract hasn’t been implemented Huineng, completely, probably the AR won’t Sanmenxia be collected outright. Product payment 14,325,000.00 4,297,500.00 30.00% The company has been sent of project in collection-letters many times, but Zhongmai, no any responses. Probably the AR Henan, won’t be collected outright. Product payment 13,750,000.00 4,605,000.00 33.49% Because the mony-collected of project in contract hasn’t been implemented Hebin, Ningxia completely, probably the AR won’t be collected outright. Product payment 47,970,000.00 14,391,000.00 30.00% The client hasn’t received the of project in special appropriation fund, Zhenxing, Shanxi probably the AR won’t be collected outright. Quality bond 2,367,995.12 2,367,995.12 100.00% The quality bond has been over 3 years. It is difficult to return it. Total 120,521,095.12 36,188,781.12 Notes: A. Major single amount is accounts receivable with significant balance of the Company (Top 5 account receivable); or Minor single account receivable with high risk in combination as per credit feature is defined as single minor accounts receivable with aging over 5 years. B. In 2008, management of the company increased money-collection power. Financial department, customer department, sales department, project bidding department, and project management department gave full cooperation to collect money and coordinated by the Chief Manager. At the end of 2008, corporation had collected arrears with aging over 5 years amounted RMB 4,331,160.00, which was13% of account receivables with aging 5 years in the last fiscal year. C. The account receicable with aging over 5 years amount RMB 1,942,965.00 has been wrote off. D. There is amount of RMB 44,119,317.50 due from Wuhan Boiler (Group) Co., Ltd holding 6.91% of the voting shares of the Company at the end of the period. E. ： The details of the top 5 accounts receivable 110 Name Amount Proportion Occurrence year Weiqiao Textile Company Limited (Group) 126,740,000.00 11.82% 2003-2007 ， Ptindahkiatulp&paper TBK(indonesia) 116,783,703.02 10.89% 2008 Shanxi Datang International Yungang Thermal 67,440,000.00 6.19% 2008 Power Co.Ltd Guangxi Xinfa Aluminium Co.Ltd 61,200,000.00 5.71% 2008 Shanxi Zhenxin (Group) Co., Ltd 47,970,000.00 4.47% 2006 Total 420,133,703.02 39.18% F.There is related transaction amount of RMB 77,776,450.3, 7.25% of total account receivable. 2. Other receivables (1) Aging analysis of other receivables is as following ： Closing balance Aging Amount Proportion Provision for bad debt （ Within 1 year including 1 year ） 133,549,359.85 100.00% 763,568.37 Total 131,263,798.79 100.00% 763,568.37 Opening balance Aging Amount Proportion Provision for bad debt （ Within 1 year including 1 year ） 1,237,655.07 100.00% 37,129.65 Total 1,237,655.07 100.00% 37,129.65 (2) Other receivables shown by categories ： Closing balance Category Amount Proportion Provision for bad debt Minor singe amount other receivables 130,715,211.73 97.88% 416,757.83 Other minor other receivables 2,834,148.12 2.12% 346,810.54 Total 133,549,359.85 100.00% 763,568.37 111 Opening balance Category Amount Proportion Provision for bad debt Other minor other receivables 1,237,655.07 100.00% 37,129.65 Total 1,237,655.07 100.00% 37,129.65 (3) Major single amount or minor single amount with individually impairment test on the closing balance: Item Amount Provision for bad debt Proportion Reason 3RC Comppany Limited 336,604.05 336,604.05 100.00% The company went bankrupt. Total 336,604.05 336,604.05 (4) Further information of other receivables ： A. Major single amount is accounts receivable with significant balance of the Company (Top 5 account receivable); or Minor single account receivable with high risk in combination as per credit feature is defined as single minor accounts receivable with aging over 5 years. B. There is amount of RMB 5,886,298.32 due from Wuhan Boiler (Group) Co., Ltd holding 6.91% of the voting shares of the Company at the end of the period. C. The details of the top 5 other receivables ： Item Amount Proportion Occurrence Nature and details year Value-added tax for export 115,144,245.10 86.22% 2008 Tax unsettled Wu han east-lake high-tech 7,500,000.00 5.62% 2008 Supporting development zone infrastructure payment Wuhan Boiler (Group) Co., 5,886,298.32 4.41% 2008 Group transaction, Ltd value-added tax for waiting for drawback export Export value-added tax 1,679,039.08 1.26% 2007 Subrogate drawback of tax Petty cash 505,629.23 0.37% 2008 Daily fund Total 130,715,211.73 97.88% D. The amount of related party receivables is RMB 5,999,888.03. It is 4.55% of other account receivable. 112 3. Long-term equity investment Categories Original Closing Opening Shareholding Voting investment balance balance % right amount Long-term equity investment under cost method Wuhan Lan Xiang 14,000,000.00 14,000,000.00 10,984,500.00 24,984,500.00 95% Power Environmental Protection Technology Company Limited WuHan WuGuo ZhiXin 5,100,135.15 5,100,135.15 -5,100,135.15 Environmental Protection Equipment Manufacturing Co., Ltd Wuhan Boiler BoYu 14,249,787.13 14,249,787.13 14,249,787.13 90% Industrial Co., Ltd Total 33,349,922.28 33,349,922.28 5,884,364.85 39,234,287.13 4. Revenue and Cost of Sales (1) The details of the revenue are shown as following ： Item 2008 2007 ． 1 Operating income 1,087,199,799.76 1,716,014,463.89 2．Other operating income 6,404,284.85 12,681,801.83 Total 1,093,604,084.61 1,728,696,265.72 (2) Segment information is shown as following ： Business segment Operating income Operating cost Operating profit Sales of boiler products 1,087,199,799.76 1,086,792,290.45 407,509.31 Total 1,087,199,799.76 1,086,792,290.45 407,509.31 * The Company’s sales to the top five customers for the year amount to RMB 749,433,599.21which accounts for 68.93% of the total revenue. (3) Revelant information of construction contract: Project Total amount Construction costs Recognised profits to Progress billings incurred to date date (recognised losses as negative figure) Fixed price 4,589,249,672.50 2,542,157,782.08 -184,392,740.77 1,587,386,726.41 construction contract 113 * Estimated total costs of certain construction contracts exceed the estimated total revenue mainly because of price increase of raw materials and so on. The Company recognises the excess amount of RMB120,165,557.65 as estimated loss. 5. Investment income (1) Sources of investment income ： Source 2008 2007 Dividends from investees under cost method 4,436,339.30 Gain or loss from disposed long-term equity investment (lose “-“) -3,580,135.15 Total -3,580,135.15 4,436,339.30 (2) Details information of dividends from investees under cost method Investee company 2007 2008 Reason of difference Wuhan Lan Xiang Power Environmental Protection 2,800,000.00 Deficit this year Technology Company Limited WuHan WuGuo ZhiXin Environmental Protection 1,636,339.30 Disposed this Equipment Manufacturing Co., Ltd year total 4,436,339.30 Note: there is no important limit of repatriation of investment income. 6. Relevant information about cash flow statement Note 1 Other cash received from operating activities 2008 2007 Other cash received from operating activities 23,325.32 25,001,439.42 Including: significant items Subsidies for early-retired and retired employees from Wuhan Boiler (Group) Co., Ltd 19,964,569.00 Collection of money advanced for others 837,154.11 Returned petty cash 23,325.32 1,787,336.57 Discounted interest funded by government 2,300,000.00 Compensation income 112,379.74 114 Note 2 Other cash paid from operating activities 2008 2007 Other cash paid relating to operating activities 39,018,133.34 55,438,720.97 Including: significant items Utility expenses 1,920,751.41 4,308,119.74 Audit fees 1,235,761.32 1,550,000.00 Laboratory examination expenses 1,702,634.98 Overseas travelling expenses 1,340,234.85 Consulting fees 5,752,418.05 19,323,089.77 Business administration expenses and company funds 2,716,304.65 1,047,703.72 Rental expense 5,266,666.66 Business entertainment expenses 2,095,770.10 5,823,928.76 Travelling expense 5,145,901.21 3,692,089.37 Office expenses 3,306,073.67 1,943,532.56 Insurance expenses 4,418,826.35 590,511.94 Other expenses 12,426,707.51 8,850,208.62 Note 3 Other cash received from investment activities 2008 2007 OtherCash received from investment activities 81,409,320.69 78,532,870.35 Including: finance income except for interest expenses 1,325,129.14 3,110,769.51 Decrease of guarantee deposits and fixed deposits 80,084,191.55 75,422,100.84 Note 4 Other cash paid from investment acticities 2008 2007 Other cash paid from investment acticities 2,722,864.08 Including: bank charges 2,722,864.08 Note 5 Supplementary information of cash flow statement 115 Supplementary information 2008 2007 1. Reconciliation of net profit to net cash flows generated from operations ： Net profit -350,468,228.46 -480,687,092.78 Provision for impairments of assets. 66,235,651.29 179,542,863.41 Depreciation of fixed assets, oil-gas assets and productive 20,811,569.20 22,259,118.32 biological assets Amortization of intangible assets 5,548,836.07 5,323,925.12 Amortization of long-term deferred expense 150,000.00 2,987,500.00 Losses/gains on disposal of property, plant and equipment, 56,120.51 1,475,809.82 intangible asset and other long-term assets (gains: negative) Losses/gains on disposal of fixed assets (gains: negative) Losses/gains from variation of fair value (gains: negative) 1,015,005.38 Finance cost (income: negative) 94,948,752.50 64,761,329.38 Investment loss (gains: negative) 3,580,135.15 -4,436,339.30 Decrease in deferred tax assets (increase: negative) -16,233,064.67 -46,885,039.81 Increase in deferred tax liabilities (decrease: negative) -862.88 Decrease in inventory (increase: negative) 28,351,927.02 -335,599,616.11 Decrease in accounts receivable from operating activities -220,443,993.30 531,875,791.79 (increase: negative) Increase in payables from operating activities (decrease: -470,361,491.45 -20,595,508.50 negative) Others Net cash flows generated from operating activities -836,808,780.76 -79,978,121.54 2. Significant investing and financing activities without involvement of cash receipts and payments Debt converted to capital Convertible bonds due within 1 year Finance leased fixed assets 3. Movement of Cash and cash equivalent 116 Supplementary information 2008 2007 Closing balance of Cash 21,343,703.49 68,737,254.99 Less: opening balance of cash 68,737,254.99 77,306,518.81 Plus: closing balance of cash equivalent Less: opening balance of cash equivalent Net increase in cash and cash equivalents -47,393,551.50 -8,569,263.82 Note 9 Related party relationship and transactions 1. Related party recognition ： According to Chinese Accounting Standards and the related regulations of China Securities Regulatory Commission, related party is defined as “when a party controls, jointly controls or exercises significant influence over another party, or when two or more parties are under the control, joint control or significant influence of the same party, the related party relationships are constituted.” 2. The information of parent company is as following: legal Relations Registered Registere Name type representa Nature hip address d capital tive 5th floor, The company is Chaoqiankun approved of investing Alstom Building, in the industry, (China) Holding foreign No.6, Si liu Claude infrastructure, and USD Investm sharehold proprietors street, San li Burckbuc energy areas that 60,964,40 ent Co., er hip tun, hler encouraged and 0 Ltd Chaoyang allowed for foreign district, investment by the Beijing. government name Shareholding % Voting right % Final control by Orgniaztion code Alstom (China) 51 51 ALSTOM HOLDINGS 71092378-2 Investment Co., Ltd CO.LTD 3. Details of subsidiaries of the Company as at December 31, 2008 is shown as following: 117 Registere legal Registered Sh Subsidiaries type Nature Principal activities d address representative capital(RMB) Wuhan Boiler 586 Control Limited Packaging, design, and Chong Bao 19,115,25000 BoYu Wuluo shareholder liability manufacturing of qian Industrial Co., Rd., company Mechanical and Ltd Wuhan (Domestic Electrical products; Enterprise) processing of metal compenents; design and manufacturing of model and mold ； Manufacturing of valve srough casting, steel casting, iron casting, nonferrous metal casting. Wuhan Lan 586 Control Limited Boiler, energy Guowei Yang 20,000,000.00 Xiang Power Wuluo shareholder liability environmental Environmental Rd., company protection products, Protection Wuhan (Domestic Steel structures, Technology Enterprise) technology research of Company heat energy products Limited and its accessorial equipment,design, technical Consultancy, technical service, sales of developed products, energy project (non-construction project) 4. Other related parties with who the Company has transaction but without control relationship: Company Relationship Orgniaztion code Alstom Power Boiler GmbH Common control Wuhan Boiler (Group) Co., Ltd The second largest shareholder 17771651-4 Wuhan Boiler (Group) Valve Co., Ltd Subsidiary of the second largest 30024542-1 shareholder Wuhan Special Boiler Complete Subsidiary of the second largest 87769907-3 Equipment Engineering Co., Ltd shareholder Wuhan Boiler (Group) Yuntong Co., Subsidiary of the second largest 30024726-7 Ltd shareholder ALSTOM Technical Service Subsidiary of controlling shareholder 60742241-0 (Shanghai) Co., Ltd 5. Related party transactions (1) purchasing and selling goods and service: Related Type of Details of Rule 2008 2007 party transaction transaction of price amount proportion amount proportion setting Wuhan Raw material Valve Market 11,212,422.22 0.67% 39,183,500.00 2.81% Boiler purchasing price (Group) Valve Co., Ltd ALSTOM Raw material Air prehearter Market 1,298,000.00 0.08% Technical purchasing Service price (Shanghai) Co., Ltd Wuhan Sales material Market 104,269.23 0.01% 2,683,800.00 0.15% Boiler (Group) price Valve Co., Ltd Wuhan Sales Boiler Market 9,102,631.01 0.82% 11,602,900.00 0.66% Boiler products (Group) price Co., Ltd Wuhan Sales Special boiler Market 80,732,431.77 7.29% 64,084,800.00 3.62% Special products Boiler price Complete Equipment Engineering Co., Ltd 119 Wuhan provides Transportation Market 70,975,019.54 100% 71,258,500.00 100% Boiler transportation service (Group) service price Yuntong Co., Ltd (2) Lease: leasor lessee Leased Lease Starting Ending yield Recognized influence asset amount date date rule Wuhan Wuhan land 2007.09.01 2009.06.30 -2,234,103.45 contract Increase Boiler Boiler administration (Group) Co., expense in Co., Ltd current fiscal Ltd year Wuhan Wuhan Office 2007.01.01 2008.12.31 -840,238.08 contract Increase Boiler Boiler Building administration (Group) Co., expense in Co., Ltd current fiscal Ltd year Wuhan Wuhan Workhouse 2007.01.01 2008.12.31 -865,516.80 contract Increase Boiler Boiler and administration (Group) Co., Shorehouse expense in Co., Ltd current fiscal Ltd year (3) Amounts due from/to related parties Closing balance Item 2008 2007 Trade receivables Wuhan Boiler (Group) Co., Ltd 44,119,317.50 40,641,647.50 Wuhan Special Boiler Complete Equipment Engineering Co., 33,657,132.81 9,597,700.00 Ltd Prepayments ALSTOM Technical Service (Shanghai) Co., Ltd 1,298,000.00 Other receivables ： Wuhan Boiler (Group) Co., Ltd 5,407,948.32 Wuhan Boiler (Group)Valve Co., Ltd 113,589.71 4,451.27 Trade payables ： 120 Closing balance Item 2008 2007 Wuhan Boiler (Group) Yuntong Co., Ltd 16,735,786.80 5,938,361.24 Wuhan Boiler (Group)Valve Co., Ltd 5,399,315.70 5,637,574.14 Wuhan Special Boiler Complete Equipment Engineering Co., 6,116,800.00 23,909,060.08 Ltd Alstom Power Boiler GmbH 683,460.00 6,200,461.02 Advanced from customers Wuhan Boiler (Group) Co., Ltd 7,490,430.00 Wuhan Special Boiler Complete Equipment Engineering Co., 19,917,800.00 Ltd Other payables Wuhan Boiler (Group) Yuntong Co., Ltd 20,000.00 Wuhan Boiler (Group) Co., Ltd 11,499,926.80 7,392,933.79 (4) Alstom (China) Investment Co., Ltd provided a loan to Wuhan Boiler Co., Ltd. The amount is RMB 974,000,000.00 with a floating downward 10% of loan rate. (5) In this fiscal year, the total amount of salary of senior managers is RMB 3,013,500.00. Note 10 Contingency There was no significant contingency at balance sheet date of the Company needed to be disclosed. Note 11 Commitment 1. Capital commitment Up to December 31 2008, the commitment related to purchases of long-term assets which the contract were signed but not reflected in the financial statements amounted to RMB307,234,340.30, USD3,555,695.00and EUR1,122,600.00. 121 2. Other commitment Up to December 31 2008, the performance guarantee and tender guarantee issued by the Company but not dued amounted to RMB212,228,040.00and USD3,126,920.00resepectively. Note 12 Events after the Balance Sheet Date There was no significant event after the balance sheet date of the Company needed to be disclosed. Note 13 Other significant events 1. Loan expense: (3) In this fiscal year, the amount of Capitalizing Loan Cost is RMB 9,734,476.20. (4) In this fiscal year, the capitalization rate of loan cost is 7.18%. 2. All holding shares of Wuhan WuGuo ZhiXin Environmental Protection Equipment Manufacturing Co., Ltd have been sold in this period. 3. Previous parent company, Wuhan Boiler (Group) Co., Ltd, entered share transfer agreement with Alstom (China) Investment Co., Ltd on April 14, 2006. The transaction is completed on August 24, 2007 after approval of relevant authorities. Alstom (China) Investment Co., Ltd is parent company of the Company currently with 51% shareholding. The transaction includes the folloing key elements according to the Share Transfer Agreement (hereinafter as the “SPA”) signed in April 14, 2006: （1）Techonology transfer agreement between Alstom (China) Investment Co., Ltd and the Company; （2）Relocation agreement; （3）Procedures and guarantte of related assets (including inventories and items in progress) and liabilities, and further compensation guarantte, with the Company as the beneficiary,; （4）Addition agreements include frame agreement of product and service supply, administration service agreement, agreement on Wuhan Speical Boiler Complete Equipment Engineering Co., Ltd, agreement on patent usage, agreement of technology licence transfer and support, agreement of patent “Alstom”usage, agreement of copyright and design usage,(from Wuhan Boiler Co., Ltd toWuhan Boiler (Group) Co., Ltd), agreement of copyright and design usage,(from Wuhan Boiler 122 (Group) Co., Ltd to Wuhan Boiler Co., Ltd). To the extent applicable, the value of the elements described above have been included in the preparation of 2008 financial statements. The full execution of above elements is critical to the future financial viability of the Company. Note 14 Supplementary information 1. Return on equity and earnings per share return on equity and earnings per share are calculated and disclosed according to“Regulation on the Preparation of Information Disclosures of Companies Issuing Public Shares No. 9: Calculation and disclosure of ROE and EPS (2007 revised)” issued by the CSRC. Earnings per Return on equity share 2008 Fully Weighted Basic Diluted diluted average EPS EPS Net profit attributable to ordinary -1.19 -1.19 shareholders Net profit attributable to ordinary -1.21 -1.21 shareholders after eliminating extrordinary gains or losses Earnings per Return on equity share 2007 Fully Weighted Basic Diluted diluted average EPS EPS Net profit attributable to ordinary -1.62 -1.62 shareholders -353.80% -126.61% Net profit attributable to ordinary -354.25% -126.77% -1.62 -1.62 shareholders after eliminating extrordinary gain or loss Calculation ： 123 Item 2008 2007 Net profit attributable to ordinary shareholders -480,602,218.59 -353,934,336.61 （ Extrordinary gain or loss Gain: negative ） 4,247,582.87 617,732.59 Net profit attributable to ordinary shareholders -481,219,951.18 after deducting extrordinary gain or loss -358,181,920.48 Opening balance of net assets attributable to 622,382,370.68 ordinary shareholders 135,840,152.10 Net profit attributable to ordinary shareholders -480,602,218.59 -353,934,336.61 Dividends 5,940,000.00 Increase of capital surplus (negative: decrease) 194,896.66 Closing balance of net assets attributable to 135,840,152.09 ordinary shareholders -200,211,211.28 Weighted average net assets attributable to 369,472,842.32 ordinary shareholders -41,062,051.15 Opening balance of share capital 297,000,000.00 297,000,000.00 Closing balance of share capital 297,000,000.00 297,000,000.00 2. Extraordinary gains or losses (negative figure represents gain) Item Amount Gains or losses on disposal of non-current assets -468,591.63 other non-operating gains or losses other than above (net) 8,624,525.44 Others extraordinary gains or losses -3,890,745.48 Subtotal 4,265,190.33 Less: Effect of income tax after deducting extrordinary gains or losses 83,759.18 Effect of deducting minority interest -66,153.72 Total 4,247,582.87 Note: Extraordinary gains or losses are calculated and disclosed according to“Regulation on the Preparation of Information Disclosures of Companies Issuing Public Shares No.1: Calculation and disclosure of ROE and EPS (2008)” issued by the CSRC (gain”+”, lose“-“). 124 3. Others extraordinary gains or losses item amount illustration tax -3,890,745.48 Paid the overdue tax amount notified by tax authority Legal representative ： ： Chief financial official Chief accountant： 125