粤照明Ｂ(200541)2008年年度报告（英文版）

FOSHAN ELECTRICAL AND LIGHTING CO., LTD Annual Report of Fiscal Year 2008 Important notes: The Board of Directors, Supervisory Committee, as well as the directors, supervisors and senior executives of Foshan Electrical and Lighting Co., Ltd (hereinafter referred to as “the Company”) hereby guarantee that there are no significant omissions, fictitious or misleading statements carried in the Report and we will accept individual and joint responsibilities for the authenticity, accuracy and completeness of the Report. None director, supervisor or senior management staff is unable to guarantee demur at the factuality, exactness or completeness of the contents in this Report. The accounting data and financial statements enclosed in this report are with the audit carried out by GP Certified Public Accountants taking the precedence. This report was prepared in both Chinese and English. Should there be any difference in interpretation of the two versions, the Chinese version shall prevail. GP Certified Public Accountants has issued Audit Report for the Company with unqualified opinion. Chairman of the Board as well as General Manager, concurrently the person in charge of accounting affairs Zhong Xincai and Financial Department Manager Wang Shuqiong declare herein: to guarantee the authenticity and completeness of the Financial Statements in this Annual Report. Contents I. Brief introduction of the Company……………………………………………2 II. Abstract of accounting data and business data ……………………………….4 III. Changes in Shares Capital and Particulars about Shareholders………...……..6 IV. Directors, Supervisors and Senior Executives and employees………..……10 V. Corporate Governance Structure…………………………………………..…17 VI. Brief Introduction of Shareholders’ General Meeting……………………….21 VII. Report of the Board of Directors……………………………………………21 VIII. Report of the Supervisory Committee…………………………………..……35 IX. Significant Events…………………………………………………………37 X. Financial Report……………………………………………………………43 XI. Documents Available for Reference………………………………………….82 1 I. Brief introduction of the Company 1. Legal Company Name in Chinese: Foshan Electrical and Lighting Co., Ltd Abbreviation: Foshan Lighting Legal Company Name in English: FOSHAN ELECTRICAL AND LIGHTING CO., LTD. Abbreviation: FSL 2. Legal representative: Zhong Xincai 3. Secretary of Board of Directors: Lin Yihui Address: No.64, Fenjiang North Road, Chancheng District, Foshan City Telephone No: (0757) 82966098 82810239 Facsimile No: (0757) 82816276 E-mail: gzfsligh@pub.foshan.gd.cn 4. Registered and Office Address: No.64, Fenjiang North Road, Chancheng District, Foshan City, Guangdong Province Post Code: 528000 Website: www.Chinafsl.Com E-mail: gzfsligh@pub.foshan.gd.cn 5. Newspapers for Disclosing the Information of the Company: China Securities Journal, Securities Times, Hong Kong Ta Kung Pao Website appointed by China Securities Regulatory Commission for publishing Annual Report: http://www.cninfo.com.cn Place for preparation of Annual Report: Secretariat of Board of Directors in Office Building of the Company, located at No. 64, Fenjiang North Road, Chancheng District, Foshan City 6. Stock Exchange Listed with: Shenzhen Stock Exchange Stock Abbreviation: Foshan Lighting (A-share) Yue Zhao Ming (B-share) Stock Code: 000541 (A-share) 200541 (B-share) 7. Other information of the Company: Initial registration date and place of the company: This Company was initially registered on October 20, 1992 at Guangdong Provincial Administration of Industry and Commerce Business License No: 002889 Tax Registration No: YUE WAI ZI 440601190352575 Organization Code: 19035257-5 Name and office place of public accounting firm engaged by the Company: GP Certified Public Accountants ADD: 10/F,Guangdong Holdings Tower, 555 DongFeng Road East, Guangzhou Tel: (020) 83859808 Fax: (020) 83800977 2 II. Abstract of accounting data and business date 1. Main accounting data for fiscal year of 2008 Unit: RMB Fiscal year Increase/decrease Fiscal year 2007 Fiscal year 2006 2008 than last year (%) Before adjustment After adjustment After adjustment Before adjustment After adjustment 1,718,712, Operating income 1,496,072,679.54 1,496,072,679.54 14.88% 1,252,922,658.57 1,252,922,658.57 832.07 274,541,10 Gross profit 501,490,465.82 501,490,465.82 -45.25% 287,623,305.38 320,987,592.71 9.51 Net profit attributable to 224,160,59 423,797,425.54 423,797,425.54 -47.11% 236,580,991.56 266,574,081.57 shareholders of listed company 5.11 Net profit attributable to shareholders of listed company 125,287,45 122,819,196.84 122,819,196.84 2.01% 167,724,672.44 171,405,584.67 after deducting non-current 5.51 gains and losses Net cash flows arising from 126,162,56 51,724,518.71 51,724,518.71 143.91% 374,404,198.59 374,404,198.59 operating activities 5.41 By the end Increase/decrease by of fiscal By the end of fiscal year 2007 the end of this year By the end of fiscal year 2006 year 2008 than last year (%) Before adjustment After adjustment After adjustment Before adjustment After adjustment 2,830,268, Total assets 3,392,985,767.27 3,392,985,767.27 -16.58% 2,563,697,231.55 2,563,697,231.55 837.06 Owner’s equity (or 2,601,745, 2,987,253,110.11 2,987,253,110.11 -12.91% 2,304,699,122.97 2,304,699,122.97 shareholder’s equity) 087.26 698,974,10 Capital stock 465,982,737.00 465,982,737.00 50.00% 358,448,259.00 358,448,259.00 4.00 2. Main accounting data and finance indicators in recent three years by the end of fiscal year of this Statement (consolidated amount) Unit: RMB Fiscal year Increase/decrease Fiscal year 2007 Fiscal year 2006 2008 than last year (%) Before After Before After After adjustment adjustment adjustment adjustment adjustment Basic earnings per share (Yuan/share) 0.32 0.61 0.61 -47.54% 0.51 0.57 Diluted earnings per share (Yuan/share) 0.32 0.61 0.61 -47.54% 0.51 0.34 Earnings per shares calculated with new capital 0.32 - - - - - stock (Yuan/share) Basis earnings per share after deducting 0.19 0.18 0.18 5.56% 0.36 0.37 non-recurring gains and losses (Yuan/share) Fully diluted return on net assets (%) 8.62% 14.19% 14.19% -5.57% 10.27% 11.57% 3 Weighted average return on net assets (%) 7.62% 16.86% 16.86% -9.24% 10.23% 10.23% Fully diluted return on net assets after deducting 4.82% 4.11% 4.11% 0.71% 7.28% 7.44% non-recurring gains and losses (%) Weighted average return on net assets after 4.54% 4.89% 4.89% -0.35% 7.26% 7.31% deducting non-recurring gains and losses (%) Net cash flow per share arising from operating 0.18 0.11 0.11 63.64% 1.04 1.04 activities (Yuan/share) By the end of Increase/decrease by By the end of fiscal year By the end of fiscal year fiscal year the end of this year 2007 2006 2008 than last year (%) Before After Before After After adjustment adjustment adjustment adjustment adjustment Net assets per share attributable to shareholders of 3.72 6.41 6.41 -41.97% 6.43 6.43 listed company (Yuan/share) Note: Deducted items of non-current gains and losses and corresponding amounts (after deducting income tax effect): Items of non-current gains and losses Amount Annotation (if applicable) Gains and losses from disposal of non-current assets -1,500,075.69 Tax return and tax reduction that exceeded mandate of examination and approval or without formal 0.00 approval document Government subsidies recorded into current gains and losses (excluding government subsidies with close relationship with the Company’s business and rationed government grants in line with the united 2,116,871.00 standard and the state policy) Capital occupied from non-financial enterprise recorded into current gains and losses 3,100,100.49 Gains and losses from combination costs and the fair value of the identifiable net assets when the 1,122,047.92 enterprise merged subsidiaries, affiliated companies and joint companies Gains and losses from exchange of non-monetary assets 0.00 Gains and losses from entrusted investment or financing 0.00 Provisions for impairment of recorded assets due to the force majeure factor, such as natural disaster 0.00 Gains and losses from debt restructuring 0.00 Expense of enterprise reorganization, expense of employee allocation and integration expense, etc. 0.00 Net current gains and losses of subsidiaries due to enterprise combination under the same control form 0.00 period-begin till combination date Net current gains and losses of subsidiaries due to enterprise combination under the same control form 0.00 period-begin till combination date Net gains and losses from contingencies irrespective of routine business 0.00 Gains and losses from changes in fair value due to transaction financial assets and liabilities, and investment income from disposal of transaction financial assets, transaction financial liabilities and 110,418,926.17 financial assets available for sale, excluding valid hedging related to routine operation of the Company Net amount of non-operating income and expense except the aforesaid items 1,103,079.50 Gains and losses from external entrusted loan 0.00 Gains and losses from changes in fair value of investment property with subsequent measurement after 0.00 adoption of fair value model 4 Impact of one-off adjustment on current gains and losses according to requirements of laws, statutes 0.00 concerning tax and accounting Income from trusteeship fees 0.00 Other gains and losses accorded with definition of non-current gains and losses 0.00 Impact on minority interests 0.00 Impact on income tax -17,737,718.98 Other gains and losses accorded with definition of non-current gains and losses 249,909.19 Total 98,873,139.60 - 3. Profit data calculated according to Rules for Information Disclosures by Companies That Offer Securities Publicly (No.9) from China Securities Regulatory Commission document is as follows: Fiscal year 2008 Fiscal year 2007 Return on net assets Earnings per share Earnings per share Profit during the reporting period Return on net assets (%) (%) (Yuan) (Yuan) Fully Weighted Fully Weighted Fully Weighted Fully Weighted diluted average diluted average diluted average diluted average Operating profit 10.44 9.24 0.39 0.39 16.58 19.71 0.71 0.71 Net profit attributable to common 8.62 7.62 0.32 0.32 14.19 16.86 0.61 0.61 shareholders of the Company Net profit attributable to common shareholders of the Company after 4.82 4.26 0.18 0.18 4.11 4.89 0.18 0.18 deducting non-current gains and losses 4. Changes in shareholder’s equity during the report period Unit: RMB Yuan Cash dividends Total amount of Surplus Undistributed Items Capital stock Capital reserves scheduled for shareholders’ reserves profit distribution equity Beginning amount 465,982,737.00 1,436,625,679.93 508,327,328.02 576,317,365.16 260,018,367.25 3,018,464,188.98 Increase in current period 232,991,367.00 -570,060,084.40 224,160,595.11 -111,622,266.26 Decrease in current period -272,599,900.56 260,018,367.25 -274,121,758.38 Ending amount 698,974,104.00 866,565,595.53 508,327,328.02 527,878,059.71 2,632,720,164.34 Change of fair Profit Profit Change reasons Transfer — value distribution distribution 5 III. Changes in Shares Capital and Particulars about Shareholders 1. Changes in share capital (1) Changes in share capital of the Company Unit: Share Before the change Increase/decrease in the change (+,-) After the change Issuance Capitalization Proportion Bonus Proportion Amount of new of public Other Subtotal Amount (%) shares (%) shares reserve fund I. Shares subject to trading moratorium 95,809,141 20.56 47,904,569 47,904,569 143,713,710 20.56 1. Shares held by the State 2. Shares held by state-owned corporation 3. Other shares held by domestic 2,546,641 0.55 1,273,320 1,273,320 3,819,961 0.55 corporation Including: shares held by domestic 2,546,641 0.55 1,273,320 1,273,320 3,819,961 0.55 non-state-owned corporation Shares held by domestic natural person 4. Shares held by foreign investment 92,283,276 19.80 46,141,638 46,141,638 138,424,914 19.80 Including: shares held by foreign 88,399,594 18.97 44,199,797 44,199,797 132,599,391 18.97 corporation Shares held by foreign natural person 3,883,682 0.83 1,941,841 1,941,841 5,825,523 0.83 5. Shares held by senior executives 979,224 0.21 489,611 489,611 1,468,835 0.21 II. Shares not subject to trading 370,173,596 79.44 185,086,798 185,086,798 555,260,394 79.44 moratorium 1. RMB ordinary shares 266,807,278 57.26 133,403,639 133,403,639 400,210,917 57.26 2. Domestically listed foreign shares 103,366,318 22.18 51,683,159 51,683,159 155,049,477 22.18 3. Overseas listed foreign shares 4. Others III. Total shares 465,982,737 100.00 232,991,367 232,991,367 698,974,104 100.00 Changes in shares subject to trading moratorium Unit: Share Shares Shares Shares at the Shares at the Name of shareholders released in increased in Reason Date of release year-beginning year-end current year current year OSRAM PROSPERITY Holding Company Limited 62,769,374 － 31,384,687 94,154,061 Share reform Apr. 25, 2011 Prosperity Lamps & Components Limited 25,630,220 － 12,815,110 38,445,330 Share reform Apr. 25, 2008 Foshan agency of Trust Company of Guangdong Uncertainty 804,375 － 402,188 1,206,563 Share reform Provincial Branch of Agricultural Bank of China ( Materials of 6 application on Foshan Jingmei Chemical Factory 321,750 － 160,875 482,625 Share reform releasing Labor Union Committee of Foshan Electrical and trading 273,487 － 136,743 410,230 Share reform Lighting Co., Ltd moratorium was not Foshan Xinghua Group Co., Ltd 160,875 － 80,438 241,313 Share reform completed. ) Foshan Southern Industrial Development Co., Ltd 160,875 － 80,437 241,312 Share reform Foshan Hongtu E-education Center 80,460 － 40,230 120,690 Share reform Jiang Hui 80,437 － 40,218 120,655 Share reform Foshan Urban Credit Cooperation 80,437 － 40,218 120,655 Share reform 156 corporation units including Nanhai Jianfeng Glass 583,945 － 291,973 875,918 Share reform Mosaic Factory Shares held by Natural persons including Zhong Xincai 979,223 － 489,612 1,468,835 － senior executives Total 91,925,458 － 45,962,729 137,888,187 － － (2) Issuance and listing of stocks Previous Issuance and Listing Stocks (RMB, ten thousand shares) Trading Listing Year Stock category Issuing date Issuing price Quantity issued volume on Total capital stock date listing 1993 Issuance of A-share 93.10 10.23 1930 93.11.23 1930 7,717.0 3858.5 (5 bonus shares to 11,575.5 (After bonus 1994 Bonus A-share 94.04 — 94.5.11 965 every 10 shares) share) 1815.3036 (Rationed 3 13,390.8036 (After Rationed A-share 95.01 8.00 95.2.22 481.1946 shares to every 10 shares) rationed share) H.K 5.61 18,390.8036 (After 1995 Issuance of B-share 95.07 5000 95.8.8 5000 (RMB6.02) issuance of B-share) Listing of employee 18,390.8036 (After listing 92.08 4.00 1157 95.9.29 1157 shares of employee shares) Capitalization of 9195.4018 (Added 5 shares 27,586.2054 (After 1996 96.09 — 96.9.20 5278.3 public reserves of A to every 10 shares) capitalization of shares) 1997 A/B-share — — — — — 27,586.2054 1998 A/B-share — — — — — 27,586.2054 1999 A/B-share — — — — — 27,586.2054 27,586.2054 (Including of 2000 Listing of rationed shares 95.01 8.00 31.9554 2000.4.14 31.9554 listing of rationed shares) 7 Capitalization of 2758.6205 (Added 1 shares 30,344.8259 (After 2000.06 — 2000.6.23 2758.6205 A/B-share to every 10 shares) capitalization of shares) Additional issuance 35,844.8259 (After 2000.12 12.65 5500 2000.12.23 5500 of A-share additional issuance) 2001 A/B-share — — — — — 35,844.8259 2002 A/B-share — — — — — 35,844.8259 2003 A/B-share — — — — — 35,844.8259 2004 年 A/B-share — — — — — 35,844.8259 2005 A/B-share — — — — — 35,844.8259 2006 A/B-share — — — — — 35,844.8259 Capitalization of 107,534,477 (Every 10 107,534,47 2007 2007.06 — 2007.6.8 465,982,736 A/B-share shares capitalize to 5 shares) 7 Capitalization of 232,991,368 (Every 10 232,991,36 2008 2008.06 — 2008.6.6 698,974,104 A/B-share shares capitalize to 5 shares) 8 2. Introduction about shareholders (1) List of the top ten shareholders and the top ten shareholders of shares not subject to trading moratorium (as of Dec. 12, 2008) Unit: Share Total number of shareholders 127,639 Particulars about shares held by the top ten shareholders Proportion of Total shares Non-tradable Shares pledged Name of shareholders Nature of shareholders shares held held shares held or frozen OSRAM PROSPERITY Holding Company Limited Foreign corporation 13.47 94,154,061 94,154,061 0 Prosperity Lamps & Components Limited Foreign corporation 10.50 73,394,034 38,445,330 0 Guangzhou Prosperity Lamps & Components Trade Domestic non-stated-owned 1.87 13,047,847 0 0 Co., Ltd corporation Hai Tong Securities (HK) Brokerage Ltd Foreign corporation 1.34 9,432,691 0 Unknown DBS VICKERS (HONG KONG) LTD A/C Foreign corporation 1.18 8,280,781 0 Unknown CLIENTS EAST ASIA SECURITIES COMPANY LIMITED Foreign corporation 0.97 6,805,057 0 Unknown Zhuang Jianyi Foreign natural person 0.83 5,825,523 5,825,523 0 Industrial and Commercial Bank of China-Rongtong Domestic non-stated-owned 0.56 3,929,214 0 Unknown Securities SZSE 100 Index Investment Fund corporation Foshan Electrical and Lighting Co., Ltd Labor Union Domestic non-stated-owned 0.51 3,622,285 0 Unknown Committee corporation NIHK-CUSTOMERS’SEGREGATED ACCOUNT Foreign corporation 0.31 2,214,048 0 Unknown Particulars about shares not subject to trading moratorium held by the top ten shareholders 8 Name of shareholders Shares held not subject to trading moratorium Type of share Prosperity Lamps & Components Limited 34,948,704 A-share Guangzhou Prosperity Lamps & Components Trade Co., Ltd 13,047,847 A-share Hai Tong Securities (HK) Brokerage Ltd 9,432,691 B-share DBS VICKERS (HONG KONG) LTD A/C CLIENTS 8,280,781 B-share EAST ASIA SECURITIES COMPANY LIMITED 6,805,057 B-share Industrial and Commercial Bank of China-Rongtong Securities 3,929,214 A-share SZSE 100 Index Investment Fund Foshan Electrical and Lighting Co., Ltd Labor Union Committee 3,212,055 A-share NIHK-CUSTOMERS’SEGREGATED ACCOUNT 2,214,048 B-share Guangdong Finance Trust Co., Ltd—Xin Guang Project 2,146,000 A-share Zhao Xiyi 1,918,039 A-share Among the top ten shareholders of the Company, OSRAM PROSPERITY Holding Company Limited, Prosperity Lamps & Components Limited and Zhuang Jianyi exist related relationship, but they are not Explanation on associated acting-in-concert. It’s unknown whether there is any associated relationship among other shareholders of the relationship among the top ten top ten shareholders and the top ten shareholders holding shares not subject to trading moratorium, whether shareholders or acting-in-concert there is any action-in-concert among them regarding to Administrative Measures on Information Disclosure of Changes in Shareholding of Listed Companies. (2) Details of controlling shareholders The first Principal shareholder of the Company is OSRAM PROSPERITY Holding Company Limited, which was established in Hong Kong in June 2004 with registered capital of HKD 500,000, when it had no substantial operations; currently held 13.47% equity of the Company. The second principal shareholder of the Company is Prosperity Lamps & Components Limited, which was established in Hong Kong in 1978 with registered capital of HKD 2 million and Legal Representative being Zhuang Jianyi, main business scope covering sales and exportation of lighting products, import and export trade; currently held 10.5% equity of the Company. (3) Illustration on relationship between the Company and its actual controlling shareholder Germany SIEMENS 100% OSRAM Germany 100% OSRAM PROSPERITY Holding Company Limited 13.47% Foshan Electrical and Lighting Co., Ltd 9 IV. Directors, Supervisors and Senior Executives and employees (I) Directors, supervisors and senior executives 1. Basic information Shares held (share) Total Remuneration remuneration drawn from drawn from the At the shareholder Name Title Gender Age Tenure At the Reason for change Company in the year entities or year end reporting beginning other related period parties or not (RMB’0000) Chairman of the Turning to Zhong Jun. 2007 to Board & General Male 65 401,765 602,647 increase 65 No Xincai Jun. 2010 Manager subscribed capital Turning to Zhuang Vice Chairman of Jun. 2007 to 3,883,682 5,825,523 Male 56 increase — Yes Jianyi the Board Jun. 2010 (B-share) (B-share) subscribed capital Executive Turning to Liu Director & Jun. 2007 to Male 46 160,800 241,200 increase 43 No Xingming Deputy General Jun. 2010 subscribed capital Manager Mr.Joerg May 2008 to Director Male 45 — — — — Yes Thaele Jun. 2010 Francis Jun. 2007 to Michael Director Male 60 — — — — Yes Jun. 2010 Piscitelli Jun. 2007 to Ye Zaiyou Director Male 52 — — — — Yes Jun. 2010 Liang Independent Jun. 2007 to Male 70 — — — — No Zhen director Jun. 2010 Wu Independent Jun. 2007 to Female 62 — — — — No Jianhong director Jun. 2010 Zhang Independent Jun. 2007 to Female 34 — — — — No Haixia director Jun. 2010 Chairman of the Ye Apr. 2008 to Supervisory Male 35 7,600 11,400 — 15 No Zhenghong Jun. 2010 Committee Turning to Jun. 2007 to Li Jianwu Supervisor Male 37 26,005 39,007 increase 11 No Jun. 2010 subscribed capital Turning to Jiao Jun. 2007 to Supervisor Male 36 9,229 13,843 increase 12 No Zhigang Jun. 2010 subscribed capital 10 Chen Jun. 2007 to Supervisor Male 59 — — — — Yes Guanbiao Jun. 2010 Shen Jun. 2007 to Supervisor Male 57 — — — — Yes Weiqiang Jun. 2010 Turning to Deputy General Jun. 2007 to Ou Muben Male 59 111,135 166,702 increase 27 No Manager Dec. 2008 subscribed capital Turning to Guo Deputy General Jun. 2007 to Male 59 101,467 152,200 increase 27 No Jieming Manager Dec. 2008 subscribed capital Turning to Huang Deputy General Apr. 2008 to Male 57 53,235 79,852 increase 16 No Guanxiong Manager Jun. 2010 subscribed capital Secretary of Turning to Jun. 2007 to Lin Yihui Board of Male 54 39,611 59,417 increase 21 No Jun. 2010 Directors subscribed capital Turning to Wang Jun. 2007 to Financial Manager Female 46 61,483 92,224 increase 27 No Shuqiong Jun. 2010 subscribed capital Total — — — — 4,856,012 7,284,015 — 264 — Director Ye Zaiyou acted as the Chairman of the Board in Nanhai Wuzhuang Color Glazed Tile Factory, which was a private enterprise and the sponsor of the Company. Directors’ presence of meeting of the Board of Directors Times that Times of Times of Times of Whether should be present presence through Times of Name Position held personal commission successively at the Board communication absence presence presence absent twice meeting means Zhong Xincai Chairman of the Board 9 4 5 0 0 No Zhuang Jiayi Vice Chairman of the Board 9 4 5 0 0 No Liu Xingming Executive Director 9 4 5 0 0 No Mr.Joerg Thaele Director 5 2 2 1 0 No Francis Michael Director 9 3 5 1 0 No Piscitelli Ye Zaiyou Director 9 3 5 1 0 No Liang Zhen Independent director 9 4 5 0 0 No Wu Jianhong Independent director 9 4 5 0 0 No Zhang Haixia Independent director 9 4 5 0 0 No 11 Meetings of the Board in this year 9 Including: on-the-spot meeting 4 Meeting through communications 5 On-the-spot meeting combined with communications 0 2. Main work experiences and position current directors, supervisors and senior executives (1) Work experience of directors Zhong Xincai: Male, born in Nanjing, Jiangsu Province, 65 years old, of technical secondary school education, who is currently Chairman of the Board of the Company. He was assigned to the Company after his graduation from Nanjing Wireless Industrial School in 1964 and has been working here ever since. Successively since 1979 he acted as chief of workshop, production and technical section chief, deputy factory director, and then the factory director; since 1985 he acted as Manager of the Company; since 1992, he was successively acted as Chairman of the Board, General Manager as well as Sectary of the Party Committee. He has been engaged in production work of electric light source for over 40 years, possessed rich professional knowledge in electric light source as well enterprise management experience. He has been honorably awarded advanced worker by Ministry of Light Industry, nationwide and provincial excellent enterpriser; provincial and municipal Party Representative, and the Deputy to the Eighth and the Ninth People's Congresses. Zhuang Jianyi: Male, born in Chaoyang, Guangdong Province, 56 years old, bachelor degree holder, master in business administration, Vice Chairman of the Board. Currently he is Chairman of the Board of Prosperity Lamps & Components Limited (HK). He has been engaged in production, trade and operation of electric light source devices for over 30 years. He is one of the principal shareholders of the Company, Foshan honorary citizen. Since 1995 he was elected as director and Vice Chairman of the Board of the Company. Liu Xingming: Male, born in Xinhui, Guangdong Province, 46 years old, bachelor degree holder, engineer, and is currently Executive Director and General Manager of the Company. He joined the Company in 1983, and once worked as Chief of workshop, assistant to general manager. He was Deputy General Manager of the Company from 1997 to 2005 and acted as General Manager from Dec. 2005 to Nov. 2008; acted as Deputy General Manager of the Company since Dec. 2008 and was in charge of sales business. Since 1995 he has been elected as director of the Company. Mr. Joerg Thaele, Male, born in Dec. 1963, German nationality, master degree holder, now is person in charge of Low Intensity Discharge Lamp Department of OSRAM Germany. He studied machinery engineering in Technical University of Munich form 1983 to 1989, then he studied business administration in Universität Augsburg and Pittsburgh University in Pennsylvania and got master degree. Francis Michael Piscitelli: Male, American, born on Oct. 19, 1948, is Vice CEO & General Manager of OSRAM Asia-Pacific Co., Ltd as well as member of IESNA. In the past over 30 years, he has been in charge of the sales, marketing, plant management, routine operation management and senior management for OSRAM 12 operations in North America, Latin America and Asia. During the last 11 years before he was assigned to work in Asia in 2006, he had been Vice President of Senior Sales for OSRAM Lighting Operation in North America. Ye Zaiyou: Male, born in Nanhai, Guangdong province, 52 years old, junior middle school in educational background, director of the Company from the 1st to 5th Board of Directors. He is currently the Chairman of the Board of Nanhai Wuzhuang Global Ceramic Factory, also sponsor shareholder of the Company. Liang Zhen (Independent Director): Male, born in Yangjiang, Guangdong Province, 70 years old, college degree, senior engineer. Since 1955 he worked in the office of Guangdong Yangjiang County Party Commity, then studied in South China Agricultural College since 1957; Since 1960, he successively worked at Ministry of Light Industry, General Association of Light Industry, State Bureau of Light Idustry, and China Association of Lighting Industry, where he is currently the Executive Director. He engaged in industrial guiding over 40 years, and has work experience in electric light source industry. He has been Independent director of the Company from the 3rd to 5th Session. Wu Jianhong (Independent Director): Female, born in Nanjing, Jiangsu Province in Dec. 1946, CCP member, college degree, senior accountant (economic engineer), China certified public accountant, member of Jiangsu Provincial Commission for Appraising Senior Accountants. She graduated from Finance and Accounting Department of Jiangsu Provincial Business College, which named Commercial College of Yangzhou University now) in Aug. 1965; From 1978 to 1992, she was the account of Nanjing Municipal Coal Building And Installation Engineering Company; from 1978 to 1992, she successively acted as Deputy Section Chief, Section Chief and Deputy Director General of Finance & Accounting Section of Jiangdu Provincial Commerce Department; from 1992 to 1994, she acted as Deputy General Manager of Jiangdu Provincial Commerce Development Corporation; from 1994 to Dec. 2001, she was Director of Finance & Accounting Section of Jiangsu Provincial Trade Department and retired in Jan. 2002. Currently she is President of Jiangsu Provincial Business Accountancy Institute as well as memeber of Jiangsu Provincial Commission for Appraising Senior Accountants. She has been Independent director of the Company from the 3rd to 5th session. Zhang Haixia (Independent Director): Female, 34 years old, bachelor in economic law, lawyer. she worked at Grandall Legal Group (Shenzhen) Office from Dec. 1998 to Feb. 2000; worked in Southwest Securities Shenzhen Investment & Banking Department from Feb. 2000 to Oct. 2001; acted as Legal Affair Department Manager in Shenzhen Enterprising Investment Co., Ltd from Oct. 2001 to May 2004; since May 2004 she worked in Shenzhen Xintong Law Firm. She is Independent Director of the fifth session. (2) Work experience of supervisors Ye Zhenghong: Male, born in Jun. 1973, college degree, was Chairman of the Supervisory Committee. He graduated from Shenyang Industrial College with Metallurgy Machinery major in Jul. 1995. He was assigned to Foshan Electrical and 13 Lighting Co., Ltd in Ku. 1995; worked in Machine Repair Shop form Jul. 1995 to Jun. 1997; worked in Machinery Dynamic Department from Jul. 1997 to Jan. 2001; acted as Equipment Management Director in T8 Fluorescent Lamp factory from Feb. 2001 to Jan. 2005; acted as Director of Machine Repair Shop from May 2005 to Jan. 2007; acted as Chief Officer of Machinery Dynamic Department from May 2006 to Dec. 2007; and acted as factory director of T8 Fluorescent Lamp factory from Jan. 2008 till now. Li Jianwu: Male, born in Nov. 1971, technical secondary school student, is the supervisor of the Company. He graduated from Nanjing Wireless Industrial School in 1993, then entered Foshan Electrical and Lighting Co., Ltd. to work until now, and successively acted as workshop director of the Company’s In-process Bulb Workshop, Polishing Workshop and Br-Wu Lamp Workshop. In 1995, he was certified electric light source assistant engineer, and was elected as the 12th session deputy to the people's congress of Foshan City in Feb. 2003. Jiao Zhigang: Male, born in Shenqiu, Henan Province in May 1972, bachelor degree holder, is supervisor of the Company. His administrative post is management storage, motorcade and logistics of the Company, including domestic distribution. He graduated from South China University of Technology in July 1994, and in the same year he entered Foshan Electrical and Lighting Co., Ltd. to work until now. Chen Guanbiao: Male, native Hong Kong, 59 years old, college degree holder, currently Supervisor of this Company. Since 1975 he was Manager of Hong Kong Silvery International Co., Ltd; since1997 he was director of Griffin Services Ltd. (British Virgin Kilo Service Co., Ltd). Since 2003 he was General Manager of Hong Kong OSRAM PROSPERITY Holding Company Limited, and currently General Manager of Lucky Light Electric Appliances Limited. He is Supervisor of the third session of the Supervisory Committee of the Company as well as director of the 4th Board of Directors. Shen Weiqiang: Male, born in Baoan, Guangdong Province, 57 years old, bachelor of science degree holder of The University of Hong Kong, currently Supervisor of theCompany. He is now the Director and General Manager of Hong Kong Fortune Industrial Co., Ltd. He has been engaged in international trade of electrical appliances for over ten years, and kept good relationship with large foreign companies in electric light source and electrical appliances. He has ever been working in large financial organizations in Hong Kong and has rich experience in enterprise management, project financing, investment planning and so on. He has ever been elected as Director of the 2nd and 3rd Board of Directors. (3) Work experience of senior executives Huang Guanxiong: Male, born in Foshan in Oct. 1951, now is Deputy General Manager of the Company. In 1969 he was transferred down to the countryside to work and live there till 1972 when he was drawn back to Guangdong Provincial Shitou Sugar Cane Chemical Works. Then he was transferred to Foshan Municipal Coal Corp. in 1977. In 1979 he was transferred to Foshan Electrical and Lighting Co., Ltd. In 1983 he was appointed to be workshop director, and he has been Wuzhuang 14 Electric Bulb Factory Director since 1993. He has been Deputy Secretary of Party Committee of the Company since July 2002, and acted as Chairman of the Supervisory Committee from 2003 to Apr. 2008. Lin Yihui: Male, born in Jiexi, Guangdong Province, in Nov. 1954, currently the Secretary of Board of Directors, postgraduate in economy, member of Communist Party of China. From Dec. 1970 to 1986 he was soldier in active service, where he successively served at the grass roots and offices. From 1986 to September 2000, he worked in Foshan International Trust Investment Company, where he successively acted as section chief and deputy general manager, and for years he was in charge of the company’s securities operation, presiding sales on commission and listing recommendation of stocks of multiple companies, and he had ever been Director of the 1st and 2nd Board of Directors of Foshan Electrical and Lighting Co., Ltd. He has been working in the Company Since October 2000. Wang Shuqiong: Female, born in Qinghai in Apr. 1962, a graduate of technical secondary school, currently Financial Department Manager. She worked in Qinghai Bulb Factory in July 1982, then transferred to Qinghai Xining Financial Bureau in Dec. 1988. She joined Foshan Electrical and Lighting Co., Ltd In April 1993 and worked herein until now. 3. Annual remuneration (1) The remuneration to directors, directors and senior executives was confirmed according to scheme decided by the Board of Directors, where the specific amount was decided in accordance with different posts, positions, and personal achievements. Total amount of annual remuneration for current directors, directors and senior executive is RMB 2.64 million. (2) For current Independent Director Liang Zhen, Wu Jianhong and Zhang Haixia, the Company did not issue any allowance or other remuneration, except for reimbursement of their travel and accommodation charges every time when they attended meetings of the Board of Directors. (3) None of Vice Chairman of the Board Zhuang Jianyi, Directors Mr. Joerg Thaele, Francis Michael Piscitelli, Ye Zaiyou or Supervisors Chen Guanbiao, Shen Weiqiang withdrew remuneration or allowances from the Company. Ye Zaiyou, Zhuang Jianyi, Chen Guanbiao and Shen Weiqiang withdrew their remuneration from Shareholder units respectively, while Mr. Joerg Thaele and Francis Michael Piscitelli withdrew remunerations from related units. None other directors or supervisors withdraw remunerations from shareholder unit or other related units, but just drew remuneration from their respective working unit. (4) Recruitment and dismission of directors, supervisors or senior executives during the reporting period. In the report period, Mr. Martin Goetzeler resigned from director due to change of work and Mr. Joerg Thaele was elected as director of the Board of Directors; Supervisor Huang Guanxiong resigned from supervisor due to change of work and worked as Ye Zhenghong as supervisor of the Company; The Company engaged Zhong Xincai as Chairman of the Board as well as General Manager; engaged as Liu Xingming as Deputy General Manager in charge of sales; engaged Huang Guanxiong 15 as Deputy General Manager in charge of production. Yuan Qijun resigned from CFO due to personal reason; (5) Deputy General Manager Ou Muben and Guo jieming retired on Dec. 31, 2008. (II) Particulars about employees Employees and professional structure: employees in active service are 8329, of which 7673 are production staff, 163 are sales staff, 425 are technical staff, with 28 being financial staff, 40 being administration staff. 792 employees are of or above technical secondary school or college level in education. Retired employees have been arranged to communities for socialized management. 16 V. Corporate Governance Structure 1. Particulars about corporate governance During the report period, the Company has strictly followed the requirements of Company Law, Securities Law, Code of Corporate Governance for Listed Companies in China, Rules for Listing Shares in Shenzhen Stock Exchange, as well as related laws and regulations of China Securities Regulatory Commission to continuously established and perfected governance structure of the Company, set up and perfected international management and control systems. Moreover, the Company further carried out corporate governance with the turning-point of the special campaign on corporate governance, timely solved problems found in rectification, further regulated operation of the Company and improve corporate governance. By the end of the report period, the actual corporate governance of the Company has been compliant with the regulatory documents issued by China Securities Regulatory Commission in regard to corporate governance of listed companies. (1) Shareholders and Shareholder’s General Meeting: the Company has prepared Articles of Association and Rules for Procedure of General Meeting, which ensured the legitimate interests and the equality all shareholders, especially those medium and minority shareholders; gave notice and convened Shareholders’ General Meeting strictly according to requirements of opinion on regulatory Shareholders’ General Meeting to ensure the voting right of shareholders with presence of attorneys. (2) Controlling shareholders and listed company: the first principal shareholder of the Company is OSRAM PROSPERITY Holding Company Limited, whose activities have never been out of the regulation of General Meeting or Board of Directors for any direct or indirect interference of the Company’s decision or production & operation activities; the Board of Directors, the Supervisory Committee and internal organizations operated independently, and separated from the first principal shareholder in personnel, assets, business, financial affairs and organizational all the time. (3) Directors and the Board of Directors: procedures for nomination of director candidates, election and engagement of directors are compliant with provisions stipulated in Articles of Association; the number of directors of Board of Directors and personnel structure are compliant with requirements of laws and statutes. All directors performed their responsibilities honestly, sincerely and diligently; the Company has formulated Rules for Procedure of Board of Directors to ensure effective operation and scientific decision of the Board of Directors. During the report period, the Company has set three Independent Directors, which is one third of the number of Board of Directors as required. (4) Supervisors and the Supervisory Committee: the Company formulated Rules for Procedure of the Supervisory Committee, with personnel and structure of Board of Supervisors compliant with requirements of laws and regulations, with individual supervisors carrying their responsibilities properly, functioning for supervision and checking independently by the spirit to be responsible for shareholders. (5) Performance appraisal and encouragement & restriction mechanism: engagement 17 of managing staff in the company is public and transparent, which accorded with provisions stipulated in laws and statutes; public and transparent mechanism for performance appraisal and encouragement & restriction had been set up, in an attempt to attract talents, and maintain stability of the managing staff. (6) Interest-relating parties: the company kept relationship of supplementing each other for joint promotion and development with all the interest relating parties such as creditors, employees, consumers, suppliers and so on. The Company sufficiently respected and protected legitimated interests of the interest relating parties, actively cooperated with the interest relating parties, and promote successive and health development of the company. (7) Information disclosure and transparency: the Company appointed specific persons to in charge of information disclosure, reception of shareholder’s visit and consultation; strictly in accordance with laws and statutes, the Company disclosed relevant information authentically, accurately, completely and timely to ensure that all shareholders gain information at equal opportunities. 2. Performance of independent directors Since three independent directors, i.e. Liang Zhen, Wu Jianhong and Zhang Haixia held their posts, they have been carrying out their duties sincerely as independent directors. The Board of Directors held 6 meetings in this fiscal year, at which Liang Zhen, Wu Jianhong and Zhang Haixia attended the meetings on time, with themselves well prepared every time as they were noticed for study of problems. During meeting time they sufficiently offered their personal comments, for solid maintenance of the overall interest of the Company. Presence of independent directors to the Board meeting Times should be present Times of personal Times of Times of Name at the Board meeting commission presence absence Remarks presence Liang Zhen 9 9 0 0 Wu Jianhong 9 9 0 0 Zhang Haixia 9 9 0 0 3. Relationships between the Company and major shareholders The Company maintained strict separation from the first principal shareholder OSRAM PROSPERITY Holding Company Limited in business, personnel, assets, organization, financial affairs and so on, with the Company having its independent and complete business and self-determination operation. In business, the Company has complete channels for supply and sales; in personnel, it has own recruitment arrangement, with none from the first principal shareholder serving in the Company; in assets, it has complete and clarified corporate property; in organization, it is independent, for the Company is a complete juridical person; in finance, the Company has its own accounts, for independent operation and separate accounts. 4. Self-appraisal on internal control of the Company 18 (1) General appraisal on internal control of the Company The internal control system was continuously perfected and supplemented according to laws, statutes and actuality of the Company, specially in special campaign on governance implemented in 2007 and 2008, the Company teased and perfected current internal control in the round, which made all systems actualized fully and effectively, was suitable for requirement of actual administration and need for development, guaranteed order start of operation and ensured development strategy was implemented completely and operation target was realized adequately. Along with development, the Company will further according to actuality, continue to perfect internal control system, ensure the implementation of systems to improve, supervise and restrict health operation of the Company, and faithfully protect interest of investors and the Company. (Details of full text of self-appraisal on internal control of the Company please refer to Self-appraisal Report on Internal Control 2008 of Foshan Electrical and Lighting Co., Ltd published on http://www.cninfo.com.cn at the same day.) (2) Opinion of the Supervisory Committee on Self-appraisal on internal control of the Company According to relevant provisions in Guidelines of Shenzhen Stock Exchange for the Internal Control of Listed Companies, the Supervisory Committee expressed opinion on self-appraisal on internal control of the Company as follows: During the report period, the Company complied with principia of internal control in accordance with relevant regulations and requirements from China Securities Regulatory Commission and Shenzhen Stock Exchange, set up and perfected internal control system covering each links of the Company according to actuality, ensured routine production and operation, protected safety and integrity of assets. The Company maintains complete organization for Internal Control, with internal auditing department and personnel completely allocated, ensuring key activities for internal control in the Company for proper implementation and sufficient and effective supervision. The Supervisory Committee considered that the self-appraisal on internal control of the Company is comprehensive, authentic and accurate, which reflected the practical situation of internal control of the Company. (3) Opinion of independent directors on Self-appraisal on internal control of the Company According to relevant provisions in Guidelines of Shenzhen Stock Exchange for the Internal Control of Listed Companies and Guiding Opinion on Establishment of Independent System by Listed Companies, the independent directors expressed opinion on self-appraisal on internal control of the Company as follows: During the report period, the Company revised and formulated a series of administration system. The internal control system of the Company was relatively sound and perfect, which complied with state laws and statutes as well as the requirements of regulatory departments. Key activities for internal control were carried out according to internal control procedures of the Company, and the Company proved maintaining strict, sufficient, 19 effective internal control of subsidiaries, associated transaction, external guarantee, significant investment and information disclosure, which ensured normal conduction of business management and operation, and was reasonable, standard, complete and effective. Independent director of the Company considered that Self-appraisal on internal control accorded with the practical situation of the internal control in the Company. 5. Report on Performance of Social Responsibilities disclosed by the Company For details please refer to Report on Social Responsibilities of Foshan Electrical and Lighting Co., Ltd in 2008 disclosed in website http://www.cinifo.com.cn on the same day. 6. Appraisal on senior executives of the Company and implementation of incentive mechanism during the report period During the report period, according to provisions of Foshan Electrical and Lighting Co., Ltd Plan on Implementation of Incentive Fund for Medium and Senior Executives reviewed and approved by the Shareholder’s General Meeting, Remuneration & Appraisal Committee carried out assessment on business performance of this fiscal year, withdrew RMB 7 million as incentive fund, which shall be allotted to medium and senior executives as well as technical backbones based on appraisal, while the Company shall lock up stocks purchased with the assigned incentive fund. 20 Ⅵ. Brief Introduction to Shareholders’ General Meeting During the reporting period, Shareholders’ General Meeting of Fiscal Year 2007 was held on 22 May 2008. And resolutions made at the said meeting were published on China Securities Journal, Securities Times and Hong Kong Takungpao dated 23 May 2008. Ⅶ. Report from the Board of Directors (Ⅰ) Production and business operation 1. Review on company operation during report period (1) Overall status during report period During the reporting period, there has been fierce competition at home and abroad in the industry of electrical light sources, with the price rise of various raw materials as well as the appreciation of RMB. What’s worse, the Chinese economy was badly hit by the international financial crisis in the second half of the year 2008. In such a harsh environment, the Board of Directors, bearing in mind the Company’s long-term development and the principle of acting responsibly towards the shareholders, gave full play to its own advantages and adopted a series of effective measures such as strengthening management, expanding production, updating the marketing concept and improving the layout of industrial bases. As a result, the Company was able to maintain a sustained and rapid growth, increasing competitiveness and a satisfactory economic performance. In the year 2008, the Company realized total yields of bulbs being 1,082 million, up 8% compared with last year; income from main business was RMB 1.689 billion, up 15.64% year-on-year; export for foreign exchange reached to USD 87.06 million, with an increase of 19.98%; total profit amounting to RMB 275 million, down 45.25% year-on-year; net profit was RMB 224 million, down 47.11% year-on-year; realized earnings per share being RMB 0.32 after tax. Total profit decreased compared with last year, mainly because there was large income from securities investment in 2007 while income from that decreased in 2008 than that of 2007. In fact, developing trend of main business of the Company was positive. In 2008, not only income from main business increased 15.64%, but also net profit of main business increased 2.01%. (2) Major advantages and difficulties existing with the Company and the stability of its profitability ① Major advantages 21 The Company is one of the top leaders in the domestic industry, with an outstanding comprehensive capability. It demonstrates strong core competitiveness especially through its distinct advantages on capital, talents, management, technology and its complete range of power-saving products of electrical light source. In 2008, the Company increased investment into the development of production bases, which not only significantly improved its production capacity, but also prepare the Company for further development. ② Major difficulties The restriction of international environmental protection rules and the impact of international financial crisis on exporting products of electric light source led to an increasingly disordered and fierce competition in the domestic market, as well as a decreasing profit rate of these products. Meanwhile, the rising prices of the main raw materials, fuel oil and labor cost created a certain degree of pressure on the Company’s main operation cost. ③ Stability of profitability Despite a growing pressure on its development, the industry of electric light source still have enormous potential due to the electric light sources’ nature as daily consumables, the improving living standard of the people along with China’s socio-economic development, and the government’s policy support to energy-saving products. Therefore, the Company’s future business and profitability are expected to enjoy great opportunities and stability. (3) Major suppliers and customers The combined purchase amount from the top 5 suppliers reached RMB 176 million, taking up 23.72% of the total purchase. And the combined sales amount to the top 5 customers reached RMB 310 million, amounting to 18.09% of the total sales. (4) There was no major change in the Company’s asset composition from last year. (5) There was no major change in the Company’s main financial data compared with last year. (6) The cash flow structure had no major change from the previous year, and no critical discrepancy from the net profit during the reporting period. (7) Operation performance of major holding companies and joint stock companies 22 Foshan Chanchang Lighting Appliances Co., Ltd. is a Sino-foreign joint venture among the joint stock companies of the Company, where the Company holds 40% of its equity. With a registered capital of USD 1.8 million, Chanchang Company mainly produces Br-Wu lamps and other special light sources and fittings. Foshan Lighting Modern Lamps Co., Ltd. was set up in the second half of the year 2004, with a registered capital of RMB 5.00 million, among which 4.50 million was offered by the Company as 90% of the total equity. This company mainly produces and sells lighting products and their fittings. Foshan Chansheng Electronic Ballast Co., Ltd. is a Sino-foreign joint venture, established in 2003 with a registered capital of RMB 1.00 million, where the Company holds 75% of its total equity. The main products of this company are ballasts, electronic transformers, etc.. Foshan Chanchang Electric Appliances (Gaoming) Co., Ltd. is a Sino-foreign joint venture, which was established in October 2005 with a registered capital of RMB 60 million, where this Company holds 70% of the total equity. Main products of this company are products of electric light source, lamps and related fittings. Foshan Lighting Times Lamps Co., Ltd. is a Sino-foreign joint venture, established in December 2005 with a registered capital of RMB 500 thousand, where the Company holds 70% of its total equity. Major business of this company is R&D, production and sales of lamps, household appliances and fittings, and other products of electric light source. Foshan Gaoming Fuwan Landscape Resort Co., Ltd. was set up in December 2006 with a registered capital of RMB 4.80 million, where the Company holds 100% of its equity. And the business scope of this company covers mainly hotel and travel service. The aforesaid six companies are in normal and standardized operation and production, all with good prospects. Besides, the joint stock companies of the Company also cover China Everbright Bank, Foshan Fo-chen Highway, Shenzhen Liangke Corp, Guangzhou Pearl River Assets Management Co., Ltd., etc., where the Company holds a relatively small proportion of equity. And the Company is receiving reasonable investment returns from these enterprises according to their economic performance. 2. Future expectations (1) Possible influences of industrial trends and market competition ① The current domestic market of electric light source is experiencing a growing competition, which results in a considerable increase of operating expenses for enterprises of electric light source, as well as a gradual decrease of the average profit rate in the industry. However, the industry of electric light source still have enormous potential due to the improving living standard of the people along with China’s socio-economic development, and the government’s policy support to energy-saving products. Therefore, the Company’s future business and profitability are expected to enjoy great opportunities and stability. As the next step, the Company is to make good use of its leadership in the industry and its brand advantage as the “King of Light in 23 China”, integrate industrial resources, expand prime operations and exert its scale advantage. At the same time, the Company will also work to strengthen internal control, lower cost expenses and improve profitability. ② Considering the adverse impact on small and medium enterprise of export restriction for environmental protection and the international financial crisis, the Company will take the opportunity to exert its great advantage as a large enterprise, actively take part in the international competition, and set up a national brand of solid recognition. On the basis of consolidating the existing market share, the Company will endeavor to expand its shares in the export market, and drive the enterprise into a wider space for development. (2) Work plan in Fiscal Year 2009 In 2009, the Company will continue to maintain a fast speed in development. At the same time, the Company is to realize its strategic goals step by step through further strengthening internal control, rationally adjusting the strategic allocation, and comprehensively improving its core competitiveness. Maintaining a leading position in the domestic industry of electric light source, the export business will be further expanded. Focuses of the Company in 2009: ① to promote delicacy management, strengthen basic management and improve the management mode so as to improve the overall operating efficiency. ② to improve the construction of Gaoming production base, so as to reach a strategic balance among production bases, expand production capacity, improve the products’ responsiveness to market changes and increase the market share. ③ to maintain and exert the Company’s comprehensive scale advantages, integrate its internal resources, and strengthen resources sharing, so as to lower operating cost and improve profitability. ④ to further adjust the product mix, vigorously develop and produce energy-saving products and products with high added value such as metal halide lamps, LED lights, energy-saving lights and automobile metal halide lamps, so as to improve profitability of products. ⑤ to exert the Company’s advantage as a leading brand, strengthen brand development, and increase brand influence and identity for the healthy and rapid development of the Company. ⑥ to keep on exploring market potential and expanding sales at home and abroad. ⑦ to keep on perfecting the corporate governance structure, regulating the operation, and improving management, so as to ensure the interests of investors and other interested parties. (3) Risks unfavorable for realizing the Company’s future development strategies and 24 business goals as well as the countermeasures taken The prediction of the Company’s future development and the Company’s new business plan for 2009 are based on the following assumptions: 1) that the related state laws, regulations and industrial policies will be free of critical changes; 2) that the steadily developing national economic as a whole will not experience major changes; 3) that no critical changes will happen to the environment of the industry where the Company is; 4) that no such force majeure or unforeseeable factors will happen that will cause serious damage to the Company’s business and assets. Under the said assumptions, the Company is expected to face the following main risks: ① Market risk The current domestic market of electric light source is experiencing rising competition, which will lead to increasing operating expenses for the enterprises of electric light source, as well as a decreasing average profit rate in the industry. In view of that, the Company is to further strengthen its internal management for lowering cost expenses, and to expand its core business for exerting its scale advantage. At the same time, actions will also be taken to expand the secondary and third markets, so as to reduce business risks and provide a wider space for the Company’s survival and development. ② Investment risk In 2009, the Company is expected to maintain a fast development, which will involve more capital input. In order to minimize the investment risk and protect the legal rights and interests of shareholders, the Company is to further improve its decision-making on investment, perfect its risk early-warning mechanism, and adopt investigation in advance, supervision in process and assessment afterwards. ③ Risk concerning product quality Internationally advanced technologies and equipments are adopted in the Company, which helps develop a mature production technique and a rational production process. In addition, great attention has been paid to the quality of products. With a state-level testing and inspection center, the product quality standards adopted by the Company are in accordance with or higher than the national or international standards. However, due to their nature as one of the low-priced and perishable articles, products of electric light source must meet a high requirement in terms of environmental protection. In view of this, the Company will dedicate itself to strengthening and perfecting quality control, and ensure the consistency of product quality with related standards, so as to maintain a fine reputation in the market. 3. Main business lines classified according to industry and products 25 Unit: (RMB) Ten Thousand Main business lines classified according to industry Increase/decrease Increase/decrease Increase/decrease proportion of proportion of proportion of operating Industry or Operating revenue Operating cost Operating operation revenue operation cost profit rate compared products profit rate compared with compared with with last year (%) (%) last year (%) last year (%) Lighting fixtures and 168,954.15 134,618.69 20.32% 15.64% 16.20% -1.87% lamps Main business lines classified according to products Industry or Increase/decrease Increase/decrease Increase/decrease products Operating proportion of proportion of proportion of operating Operating revenue Operating cost profit rate operation revenue operation cost profit rate compared (%) compared with compared with with last year (%) last year (%) last year (%) Lighting fixtures and 168,954.15 134,618.69 20.32% 15.64% 16.20% -1.87% lamps Note: The gross profit rate in this period was 20.32%, a decrease of 1.87% from 20.71% of last year. The reduction was mainly due to the rising prices of raw materials and fuel oil. 4. Main business lines by region Unit: (RMB) Ten Thousand Increase/decrease proportion Region Operating income of operating income compared with last year (%) Domestic sales 102,900.52 15.2 5% Export sales 64,453.72 16.6 2% 5. Items measured with fair value 26 Unit: (RMB) Yuan Accumulative Amount at the Profit and loss from amount of the Withdrawal of Amount at the end Items beginning of this fair value changes changes in the fair depreciation in this of this period period in this period value recorded in period the equities Financial assets: Of which: 1. financial assets measured at their fair values and of which the variation is 107,217,672.71 -54,117,672.71 recorded into the profits and losses of this period Of which: derivative financial assets 2. Available-for-sale 511,206,158.54 -449,424,956.54 financial assets Subtotal of financial assets 618,423,831.25 -54,117,672.71 -449,424,956.54 0.00 Financial liabilities Investment real estate Productive biological assets others total 618,423,831.25 -54,117,672.71 -449,424,956.54 0.00 (Ⅱ) Investment of the Company 1. Funds raised In the reporting period, there was no fund raising, or the application of funds raised in previous periods. 2. Major projects invested with non-raised funds As reviewed and approved by the Shareholders’ General Meeting, the Company is, within three to five years, to work on five major projects with its own capital over RMB 600 million. During the reporting period, great efforts were made to implement those projects, i.e. the project of metal halide lamps, and the projects of expanding production of energy-saving lamps, automobile lamps, fluorescent lights, etc.. And those projects are being carried out step by step according to the plan, some of which have reached the phase of production and achieved good benefit. (Ⅲ) Routine work of Board of Directors 27 1. Meetings and resolutions made by Board of Directors during the reporting period A total of nine meetings were held in the year by the Board of Directors. Details and resolutions of the meetings were published respectively on China Securities Journal, Securities Times and Hong Kong Takungpao. And the dates of the meetings as well as the dates of their information disclosure are as follows: (1) The 5th Meeting of the 5th Board of Directors was held on 17 Jan. 2008, of which details were disclosed on 22 Jan. 2008. (2) The 6th Meeting of the 5th Board of Directors was held on 17 Apr. 2008, of which details were disclosed on 21 Apr. 2008. (3) The 7th Meeting of the 5th Board of Directors was held on 23 Apr. 2008, of which details were disclosed on 25 Apr. 2008. (4) The 8th Meeting of the 5th Board of Directors was held on 23 Apr. 2008, of which details were disclosed on 25 Apr. 2008. (5) The 9th Meeting of the 5th Board of Directors was held on 22 May 2008, of which details were disclosed on 23 May 2008. (6) The 10th Meeting of the 5th Board of Directors was held on 29 Jul. 2008, of which details were disclosed on 31 Jul. 2008. (7) The 11th Meeting of the 5th Board of Directors was held on 26 Aug. 2008, of which details were disclosed on 28 Aug. 2008. (8) The 12th Meeting of the 5th Board of Directors was held on 24 Oct. 2008, of which details were disclosed on 26 Oct. 2008. (9) The 13th Meeting of the 5th Board of Directors was held on 22 Dec. 2008, of which details were disclosed on 24 Dec. 2008. 2. Execution of resolutions made at Shareholders’ General Meeting by Board of Directors The Board of Directors carefully implemented the resolutions made at the Shareholders’ General Meeting. The 11 resolutions (including the profit distribution plan) passed at the Shareholders’ General Meeting in 2007 were fully executed. The plan of authorizing the Board to set up a fund for encouraging the medium and senior management staff with equities is also in progress. (Ⅳ) Duty fulfillment of Audit Committee 1. Work of Audit Committee of Board of Directors The Audit Committee of the Board is composed of two independent directors and two directors, where the Chair Person is assigned to an independent director with professional qualification in accounting. 28 According to the related provisions of China Securities Regulatory Commission and Shenzhen Stock Exchange, as well as the Rules of Implementation for the Audit Committee of the Board, the Audit Committee diligently carried out the following jobs. 1) The Committee carefully read over the Company audit plan for fiscal year 2008 and related materials. After the Committee’s discussion with the registered accountants from GP Certified Public Accountants Co., Ltd., who are in charge of the annual audit of the Company, the agenda for the audit of fiscal year 2008 was finalized. 2) Before the presence of the registered accountants for the annual audit, the Committee read through the initial accounting statements and gave their written review comments. 3) After the presence of the registered accountants for the annual audit, the Committee communicated with them in regard to the problems found out during the audit and the time schedule for the submission of the audit report. 4) After the registered accountants for the annual audit issued their preliminary audit opinions, the Committee once again reviewed the Company’s financial and accounting statements for fiscal year 2008 and then offered their written review comments. 5) After the registered accountants from GP Certified Public Accountants Co., Ltd. had issued their annual audit reports for fiscal year 2008 respectively according to the international accounting standard and domestic accounting standard, the Committee convened a meeting to review and summarize the audit work for fiscal year 2008 carried out by registered accountants from GP Certified Public Accountants Co., Ltd., and to conduct voting and make resolution regarding the Company’s accounting statements and the proposal on employing auditors for the next fiscal year. 2. Review comments, summary reports and relevant resolutions by the Audit Committee of the Board of Directors 1) Review comments on the financial and accounting statements submitted by the Company before presence of the registered accountants for the annual audit We have reviewed the financial statements submitted by the Company’s Financial Department on 20 Jan. 2009, including the balance sheet dated 31 Dec. 2008, the profit statement, the statement of changes in stockholders’ equity accounts and the cash flow statement for fiscal year 2008, as well as the notes to the said financial statements. Special attention has been paid to the authenticity and completeness of the accounting data, as well as whether the financial statements are in strict compliance 29 with the newly issued Accounting Standards for Business Enterprises and other 37 specific rules and the Company’s regulations concerning financial affairs. Through inquiring related financial personnel and management personnel of the Company, referring to the meeting minutes of shareholders’ meetings, the Supervisory Board, the Board of Directors and relevant committees, as well as the related account books, records and slips, and implementing the analyzing procedures upon critical financial data, we are of the opinion that: All the Company’s transactions are truly and completely recorded with a proper accounting policy and rational accounting estimates, and without findings of any critical misrepresentation or omission of information; There are no findings concerning any large shareholder misappropriating the capital of the Company; There are no findings of the Company’s irregular external guaranty or abnormal affiliated transaction. Since there is a period of time between this preliminary review of the financial statements and the formal issuance of the auditor’s report and the financial statements, we hereby remind the Company’s Financial Department to pay attention to dealing with the follow-up affairs after the date of Balance Sheet in strict compliance with the New Accounting Standards for Business Enterprises, so as to ensure the factuality, fairness and completeness of the financial statements. 2) Review comments of Audit Committee on financial and accounting statements of the Company after issuance of the preliminary audit opinions by registered accountants for the annual audit We have reviewed the financial statements submitted by the Company on 18 Mar. 2009, on which the registered accountants had issued their preliminary audit opinions, including the balance sheet dated 31 Dec. 2008, the profit statement, the statement of changes in stockholders’ equity accounts and the cash flow statement for fiscal year 2008, as well as the notes to the said financial statements. Special attention has been paid to the authenticity and completeness of the accounting data, as well as whether the financial statements are in strict compliance with the newly issued Accounting Standards for Business Enterprises and other 37 specific rules and the Company’s regulations concerning financial affairs. Meanwhile, the follow-up affairs after the date of Balance Sheet have also been one of our focuses. After our communication with the registered accountants regarding their preliminary audit opinions, as well as our further referring to the supplementary account books and records, we decide to maintain our original review comments on the Company’s financial statements and believe that: The Company has handled the follow-up affairs after the date of Balance Sheet in strict compliance with the New Accounting Standards for Business Enterprises; And the Company has prepared its financial statements in accordance with the New Accounting Standards for Business 30 Enterprises and the related financial system of the Company, which are a fair presentation of the financial position of the Company as of 31 Dec. 2008, as well as the operating results and cash flows for the year then ended. 3) Summary report by Audit Committee of the audit work in 2008 performed by registered accountants from GP Certified Public Accountants Co., Ltd. We have examined the Working Plan for the 2008 Annual Audit submitted by the Company’s Financial Department on 31 Dec. 2008, and had effective communication with the audit team leader from GP Certified Public Accountants Co., Ltd. in regard to the said working plan. As a result, we both agree that the working plan is made in detail with clear responsibilities for every auditor, providing a firm guarantee for the smooth implementation of audit in 2008. According to the said working plan, 15 auditors (the project leader included) from GP Certified Public Accountants Co., Ltd. came to the site and started their audit work on 5 Feb. 2009. On 28 Feb. 2009, they finished the site audit of all companies, of which the individual financial statements were to be merged into the consolidated financial statements. And the project manager conducted regular and effective communication with the members of the Audit Committee and the Company in regard to the consolidated financial statements, accounting adjustments, application of the accounting policy, and deficiencies of the accounting work. Through the communication, all parties had a deeper understanding of the Company’s operating conditions, financial affairs and implementation of the New Accounting Standards for Business Enterprises, which provided the foundation for the audit team to draw a fair audit conclusion. During the site audit, each member of the Audit Committee paid close attention to any possible problem arising in the audit process. They frequently communicated with the auditors by phone and meeting with each other on the subjects as follows: 1) Whether all the transactions were recorded and reported fully, truly and fairly; 2) Whether all the financial statements were produced in accordance with the New Accounting Standard for Business Enterprises, the regulations of the securities regulatory authorities and the requirements of the Company’s financial system; 3) Whether the Financial Department’s activities were in line with relevant laws and regulations and other external requirements, as well as management policies and instructions and other internal requirements; 4) Whether the internal accounting control system of the Company was adequately implemented; 5) Whether all departments of the Company fully cooperated with the auditors in providing ample and reasonable audit evidence. 31 The auditors gave positive replies concerning the aforesaid questions and issued a standard unqualified auditor’s report. In view of the above, we are of the opinion that: With ample time for auditing, excellent professional skills and reasonable personnel allocation, the auditors 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 as of 31 Dec. 2008, operating results and cash flows position for the year then ended, and the audit conclusion was in compliance with the Company’s actual situation. 4) Resolution by Audit Committee on the 2008 annual audit and the employment of audit agency The Audit Committee of the Board of Foshan Electrical and Lighting Co., Ltd. held a meeting at the meeting room at the 5th floor of the Company venue at 9:30 a.m., 27 Mar. 2009. Four people were supposed to attend the meeting with an actual attendance of three (Mr. Francis Michael Piscitelli was absent for a business trip). All members of the Audit Committee signed to approve the following proposals: 1. 2008 annual financial and accounting report of the Company; 2. Summary report by the Audit Committee on the 2008 annual audit performed by GP Certified Public Accountants Co., Ltd.; 3. GP Certified Public Accountants Co., Ltd. has been serving as the Company’s annual auditor for more than ten years. And it performed competently, diligently and responsibly during the 2008 annual auditing. Therefore, the Audit Committee hereby proposes to renew the employment of GP Certified Public Accountants Co., Ltd. as the annual auditor for the year 2009. The above proposals shall be submitted to the Board of Directors of the Company for review and approval. (5) Duty fulfillment of the Remuneration and Appraisal Committee of the Board The Remuneration and Appraisal Committee of the Board comprises four directors, among which two are independent directors. And the Committee is chaired by Independent Director Mr. Liang Zhen. During the reporting period, based on the completion status of the Company’s major financial targets and business objectives in 2008, the work scopes and main responsibilities of the Company’s present directors, supervisors and other senior 32 executives, and the completion status of indexes concerning the performance assessment of the Company’s directors, supervisors and other senior executives, the Committee conducted an assessment in regard to the remuneration of the directors, supervisors and other senior executives and expressed its assessment opinion as follows: The remuneration range for the directors, supervisors and other senior executives disclosed in the 2008 Annual Report were decided and adopted in accordance with the relevant stipulations in the Company’s Rules for Managing Remuneration; The Company’s withdrawal of the encouragement fund was in line with the requirements of the Plan for Implementing the Equity Incentive Mechanism for Middle-and Top-Rank Management Personnel and the Specific Rules for Implementing the Equity Incentive Mechanism, both of which had been approved by the Shareholders’ General Meeting. In the Committee’s opinion, the Company’s encouragement to its middle-and top-rank management personnel and its operational and technical professionals was in accordance with relevant laws and regulations, which would promote the close connection of interest among the management personnel, the Company and its shareholders. (6) 2008 Annual Profit Distribution Plan The minimum net profit achieved by the Company in 2008 was RMB 227,097,272.30. After 10% net profit of RMB 22,709,727.23 was appropriated as surplus reserve, the profit available for distribution to shareholders this year reached RMB 498,104,733.70 (including retained profit of last year amounting to RMB 293,717,188.63) Based on the total share capital of 698,974,104 shares as at the end of 2008, the Company’s Board of Directors is to distribute the cash dividend of RMB 2.2 (tax included. And dividends for B shares will be paid after being converted into HK dollars.) for every 10 shares to all shareholders of A and B shares. The actual total amount of dividend distributed will be RMB153,774,302.88， and the rest of the profit will be carried down the next year for distribution. Meanwhile, based on the total share capital of 698,974,104 shares as at the end of 2008, the Company is to transfer the capital reserve into the share capital at the rate of 10shares for every 4 shares to all shareholders of A and B shares. After the transfer, the capital reserve of the Company will decrease from RMB 866,561,081.10 to RMB 586,971,439.50, while the total share capital will increase from 698,974,104 shares to 978,563,745 shares. The cash dividend paid to shareholders of B share will be converted into HK dollars by the middle rate between RMB and HKD declared by the Bank of China on the first business after the resolution of the Shareholders’ General Meeting 33 The implementation of this profit distribution plan is subject to the review and approval of the Shareholders’ General Meeting. (7) Other matters to report 1. China Securities Journal, Securities Times (for A-share, in Chinese language) and Hong Kong’s Ta Kung Pao (for B-share, in English language) are designated by the Company as the newspapers for disclosing information, which remained unchanged during the reporting period. 2. Special statement and views of independent directors on the Company’s guarantees for external parties After examination, it is confirmed that the Company provides no guarantee for shareholders of listed companies, shareholders’ holding subsidiary, shareholders’ subsidiaries, other related parties upon which the Company holds less than 50% shares, non-legal entities or individuals. 34 Ⅷ Report of Supervisory Board 1. Work of the Supervisory Board during the reporting period The Supervisory Board convened three meetings during the reporting period. And the Chairman of the Supervisory Board took part in the meetings held by the Board of Directors and the management team meetings, participated in the discussion of the Company’s important decisions, and examined and supervised the motions and procedures of the meetings held by the Board of Directors, as well as the Shareholders’ General Meeting. Meetings held by the Supervisory Board are specified as follows: (1) On 7 Apr. 2008, the written notice on the 3rd meeting of the 5th Supervisory Board was issued to all supervisors by manual delivery or fax. On 17 Apr. 2008, the meeting was convened at the Administrative Conference Hall of the Company, with all the five supervisors attending the meeting. The meeting was in accordance with the Company Law and the Articles of Association of the Company. Mr. Huang Guanxiong, Chairman of the Supervisory Board, presided at the meeting, with the resolutions approved as follows: ① The 2007 annual report on the work of the Supervisory Board; ② The 2007 annual report and its summary, including both versions in the Chinese language and English language; ③ The 2007 annual report on the final financial accounts, as well as the plan of profit distribution and turning capital reserve to share capital (2) On 23 Apr. 2008, the 4th meeting of the 5th Supervisory Board was convened by fax, with all the five supervisors attending the meeting. And Mr. Ye Zhenghong was elected as Chairman of the Supervisory Board. (3) On 29 Jul. 2008, the 5th meeting of the 5th Supervisory Board was convened at the Administrative Conference Hall on the 5th floor of the Company building. Four of the five supervisors were present at the meeting, with Mr. Shen Weiqiang absent for a business trip. This meeting was convened in accordance with the relevant requirements of the Company Law and the Articles of Association of the Company. And the meeting reviewed and unanimously approved the following resolutions: ① The report for the first half of 2008 and its summary (in both Chinese language and English language); ② The Proposal on the Company’s not conducting profit distribution or turning reserves into share capital in the first half of the year 2008 ③ The Report on the Rectification regarding Corporate Governance ④ The Self-examination Report on the Capital Misappropriation by the Main 35 Shareholder or Other Related Parties 2. Independent opinions from the Supervisory Board on the following matters: (1) About the Company’s operation in accordance with the law. The Company has been operating its business in strict compliance with the law and promoting an increasingly standardized operation. According to the requirements of relevant securities regulatory authorities, it has established a series of rules and systems concerning the corporate governance, so as to improve the Company’s corporate governance and standardized operation. The Company enjoys a sound internal control system, where operation decisions concerning such subjects as funds application, investment projects and operating management will be discussed in the Board of Directors. In addition, investigations will be conducted before decision-making to explore the feasibility. And the procedure of the Company’s decision-making is in line with the law. What’s more, independent directors are asked for advices before a major decision is made, so as to promote a better and more effective decision-making, which will lead to a better economic performance of the Company. Up until now, the Supervisory Board finds that the duty performance of the directors and managers has involved no act in violation of laws, regulations and the Company’s Articles of Association, or act damaging the Company’s interests. Observing laws and disciplines, they have been working hard in an honest and innovative way, which greatly contributes to the Company’s development. (2) About the inspection on the Company’s financial status. The Supervisory Board is of the opinion that the audit report and the explanation on related matters provided by GP Certified Public Accountants Co., Ltd. is a factual reflection of the Company’s financial position and operating results. (3) About the use of the recently raised funds. The Company raised RMB 667 million for A-share issuing in the second half of the year 2000. Up until now, the Company has been investing the capital into the nine projects (excluding the working capital projects) disclosed in the offering document, which means that the actual use of the raised funds is in accordance with what is stated in the offering document. And the raised funds have now been used up with good economic returns. (4) During the reporting period, the Company did not carry out any sales of its assets. And the purchase of the related party’s assets was carried out with fair and reasonable prices and in accordance with the law, which did no harm to the Company’s interests. (5) GP Certified Public Accountants Co., Ltd. issued an unqualified audit report concerning the Company’s 2008 financial statements. 36 IX. Significant Events 1. There is no significant lawsuit or arbitration case occurred in the reporting period. 2. Asset acquisition: Counter Asset Date of Purchase Net profit Net profit Related About pricing principal Whether Whether Relations party or purchased purchase price contributed contributed from transaction or all assets all credits ultimate since beginning to end of not (if yes, involved and debts controller purchased till 2008 (applicable to indicate are involved end of 2008 combinations of the pricing transferred are same controller) principal) transferre d Prosperity Prosperity Dec.31, 7,200.00 0.00 0.00 Yes Based on net worth Yes Yes Controlled by Lamps and (Nanjing) 2008 evaluation audited and the Company’s Components Lighting confirmed by CPA and vice chairman Co., Ltd. Components asset appraisal company Co., Ltd. approved by both sides Prosperity Land use Aug.27, 2,500.00 0.00 0.00 Yes Based on net worth Yes Yes Controlled by (Xinxiang) right in 2008 evaluation audited and the Company’s Electro-optic Xiaodian confirmed by CPA and vice chairman Machinery Industrial asset appraisal company Co., Ltd. Park of approved by both sides Xinxiang Municipal 3. There is no sale of asset in the reporting period. 4. Affairs about related transactions: Related transactions in daily operation: Unit: RMB 0000’ Related party Provided products and labor services Received products and for related party labor services from related party Transaction Proportion in Transaction Proportion in similar volume similar transactions volume transactions Prosperity Lamps and Components 6,750.25 3.97% 1,053.61 1.33% Co., Ltd. Prosperity Electrical (China) Co., Ltd. 167.42 0.10% 523.64 0.66% Prosperity (Nanjing) Lighting 0.00 0.00% 246.63 0.31% Components Co., Ltd. Prosperity (Hangzhou) Lighting 984.06 0.58% 0.00 0.00% Appliance Co., Ltd. OSRAM (China) Lighting Co., Ltd. 4,704.00 2.77% 0.00 0.00% Prosperity (Xinxiang) Electro-optic 39.85 0.02% 122.09 0.15% Machinery Co., Ltd. Total 12,645.58 7.43% 1,945.97 2.46% 37 Of which, related transition on providing products or labor service to controlling shareholders and its subsidiary companies was RMB 126.4558 million during the report period. ● All transactions above are in compliance with the market price principal and are fair and just. ● Such related transactions are based on the needs for the Company’s operation, which benefit the Company’s long-term development, and are necessary. ●These related transactions will not have an impact on the Company’s independence. 4. Significant Contracts: there were no such events as entrustment, contracting, lease of other companies’ assets by the Company and vice versa; the Company neither provided guarantee nor entrust others to manage cash assets. 5. In the reporting period, neither the Company nor the shareholders holding over 5% share of the Company made nor had ever made any commitment that affects the operation achievement and financial status of the Company. 6. In the reporting period, the Company continued to engage GD Certified Public Accountant as its auditing agency. GD Certified Public Accountant has provided auditing services to the Company for 15 fiscal years in succession. Remuneration the Company paid the certified public accountant for the auditing work in this report period is RMB 460,000. 7. In the reporting period, none of the Company, its Directors, Supervisors, Senior Executives, shareholders or actual controllers had received any inspection, administrative punishment or criticism by circulating a notice from CSRC, or public censure from Stock Exchange. 8. In the reporting period, there is no event occurred, as specified in the 67th item of the Securities Laws and the 17th item of the Detailed Rules on Information Disclosure of Public Offering (trial version), or event considered significant by the Board of the Company. 9. Securities investment in the reporting period By the end of this reporting period, the balance market value of the Company’s securities investment is 0 yuan. 10. Share holding of non-listed financial enterprises in the report period 38 Name of Initial investment Number of Proportion End book Profit and Changes of Account title Share Objective amount share in the value loss ownership sources Company holding company's during rights shares reporting during period Reporting period Guangdong 500,000.00 229,792 5.00% 500,000.00 0.00 0.00 Long-term Additional Development investment issue Bank, Foshan Branch China 30,828,816.00 24,176,768 0.29% 30,828,816.00 0.00 0.00 Long-term Additional Everbright investment issue Bank Xiamen City 115,009,875 49,950,000 9.99% 115,009,875 0.00 0.00 Long-term Additional Commercial investment issue Bank Co., Ltd. Total 146,338,691 74,356,560 _ 146,338,691 0.00 0.00 _ _ 11. Research, Communication and Interview Receiving during reporting period as follows: Reception Date Reception Reception way Reception Object Major contents and Location information provided Mar. 12, 2008 The Company Field Research Researcher from Guosen Securities Company production Co., Ltd. and operation Mar. 12, 2008 The Company Field Research Researcher from Boshi Funds Company production Management Co., Ltd. and operation July 7, 2008 The Company Field Research Zhong Hai Funds Management Co., Company production Ltd. and operation Aug. 5, 2008 The Company Field Research China Securities Co., Ltd. Company production and operation Aug. 5, 2008 The Company Field Research Yinhua Fund Management Co., Company production Ltd. and operation Aug. 5, 2008 The Company Field Research Boshi Funds Management Co., Ltd. Company production and operation Aug. 5, 2008 The Company Field Research Rongtong Fund Management Co., Company production Ltd. and operation Aug. 5, 2008 The Company Field Research Invesco Great Wall Fund Company production Management Co. Ltd. and operation Aug. 5, 2008 The Company Field Research ChinaAMC Fund Management Co. Company production Ltd. and operation Sept. 1, 2008 The Company Field Research Shenyin Wangguo Securities Company production and operation Sept. 1, 2008 The Company Field Research GF Fund Management Co. Ltd. Company production 39 and operation Sept. 1, 2008 The Company Field Research Shanghai Yuanwu Co., Ltd. Company production and operation Sept. 1, 2008 The Company Field Research CCB Principal Asset Management Company production Co., Ltd and operation Sept. 1, 2008 The Company Field Research Greatwall Securities Company production and operation Sept. 1, 2008 The Company Field Research West Fund Management Co., Ltd. Company production and operation Sept. 1, 2008 The Company Field Research Shanghai Liutong Trust Company production and operation Sept. 1, 2008 The Company Field Research Penghua Fund Management Co., Company production Ltd. and operation 40 Auditors’ Report GKSS Zi[2009] No. 08000300011 To the Shareholders of Foshan Electrical & Lighting Co., Ltd.: We have audited the financial statements of Foshan Electrical & Lighting Co., Ltd. (the Company) which comprise the Balance sheet and consolidated Balance Sheet as at 31 December 2008, and the Income Statement and Consolidated Income Statement, Statement of Changes in Equity and Consolidated Statement of Changes in Equity, as well as Cash Flow Statement and Consolidated Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory notes. I. The management level’s responsibility for the financial statements The management level is responsible for the preparation and the true and fair presentation of these financial statements in accordance with Accounting Standards for Business Enterprises of the People’s Republic of China. These responsibilities include designing, implementing and maintaining internal control relevant to the preparation and the true and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. II. Auditor’s responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Independent Audit Standards promulgated by the Chinese Institute of Certified Public Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and true and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 41 III Audit opinion In our opinion, the accompanying consolidated financial statements give a true and fair view of the financial position of the Group as of 31 December 2008, and of the results of its operations and cash flows for the year then ended in accordance with Accounting Standard for Business Enterprise. GP Certified Public Accountants CPA: Wang Shaohua Zhuhai ·China CPA: Hong Wenwei 7 April 2009 42 X Financial Report I. Company Profile Company History Foshan Electrical & Lighting Co., Ltd. (hereinafter referred to as “the Company”), a joint-stock limited company jointly founded by Foshan Electrical and Lighting Company, Nanhai Wuzhuang Color Glazed Brick Field, and Foshan Poyang Printing Industrial Co. on Oct. 20, 1992 by raising funds under the approval of YGS (1992) No. 63 Document issued by the Joint Examination Group for Experimental Enterprises in Stock System of Guangdong Province and the Economic System Reform Commission of Guangdong Province, is an enterprise with its shares held by both the corporate and the natural persons. As approved by China Securities Regulatory Commission with Document (1993) No. 33, the Company publicly issued 19.3 million shares of social public shares (A shares) to the public in Oct., 1993, and was listed in Shenzhen Stock Exchange for trade on Nov. 23, 1993. The Company was approved to issue 50,000,000 B shares on Jul. 23, 1995. And, as approved to change into a foreign-invested stock limited company on Aug. 26, 1996 by (1996) WJMZEHZ No. 466 Document issued by the Ministry of Foreign Trade and Economic Cooperation of the People’s Republic of China. On Dec. 11, 2000, as approved by China Securities Regulatory Commission with ZJGS Zi [2000] No. 175 Document, the Company additionally issued 55,000,000 A shares. At approved by the Shareholders’ General Meeting 2006 and 2007, the Company implemented the plan of capitalization of capital reserve, after the transfer, the registered capital of the Company has increased to RMB 698,974,104.00 Yuan. And the registration code for corporate business license is QGYZZ No. 002889. Legal representative: Zhong Xincai Address: No. 64, Fenjiang North Road, Foshan, Guangdong Province Business Scope of the Company R&D and production of electro-optical source products, electro-optical source equipment and electro-optical accessories, sales of such products made by it on both the domestic and overseas markets, and the relevant engineering consultation service. The main products of the Company include all kinds of electro-optical source products. Basic Structure of the Organ of the Company Shareholders’ General Meeting is the highest authority organ of the Company, Board of Directors is an executive organ to carry out the provisions formulated by the Shareholders’ General Meeting, Board of supervisors is an internal supervision organ of the Company. and the General Manager is responsible for routine operation and management. Up till the end of the reporting period, the Company owns 7 holding subsidiaries such as Foshan Chanchang Lighting Components Co., Ltd., Foshan Chansheng Electronic Ballast Co., Ltd., FSL Modern Lamps and Lanterns Co., Ltd., Foshan Chanchang Electric Appliance (Gaoming) Co., Ltd., Foshan Taimei Times Lamps and Lanterns Co., Ltd., Foshan Gaoming Fuwan Landscape Resort Co., Ltd. and Prosperity (Nanjing) Lighting Components Co., Ltd.. Financial Report Approval and Submission The Financial Report were approved and authorized for issue by the Board of Directors on 7 Apr. 2009. 43 II. Statemen t of Co mpliance with C orporate Accounting Standards The financial statements prepared by the Company is in compliance with the requirements of Accounting Standard for Business Enterprises, which give a true and fair view of the state of affairs of the company as for the financial position and operating results & cash flows. II I. Ba se of F ina nci al Sta te me nt P re p ara tion With sustaining operation as a postulate premise, the Company prepared the financial statement in accordance with the regulations related with the Accounting Standard for Business Enterprise – General Standard (CZBL No. 33) and the Circular of the Ministry of Finance of the People’s Republic of China on Printing and Issuing the Thirty-eight Specific Standards such as Accounting Standard for Business Enterprises No. 1 - Inventories (CK[2006] No. 3) promulgated by the Ministry of Finance on February 15, 2006, and the Circular of the Ministry of Finance on Printing and Issuing Accounting Standard for Business Enterprise - Application Guide (CK [2006] No. 18) (hereinafter referred to as “the new accounting standard”) promulgated by the Ministry of Finance on October 20, 2006, as well as the Circular on Issuing the No.7 Questions and Responses of Information Disclosure Standards of Public Companies ------ Compilation and Disclosure of the Comparative Financial Accounting Information during the Transition Period between the New and Old Accounting Standards issued by China Securities Regulatory Commission on February 15, 2007 and in line with the actual transactions and issues, and the following primary accounting policies and accounting estimates. IV. Main accounting policies, accounting estimates and methods of preparing the Company’s consolidated financial statement Fiscal Year A fiscal year is accounted from January 1 to December 31. Functional Currency Renminbi is taken as functional currency of the Company. Accounting Basis and Principle The accounting basis of the Company is the accrual system; generally by adopting of historical cost as the accounting principle. And the Company adopts measurement replacement costs, net realizable values, present values and fair values when the confirmed accounting elements accord with the requirements of the accounting standard for business enterprise and can be reliably measured. Accounting Method for Foreign Currency Company day-to-day accounting operations for foreign currency non-monetary items is taken the medium price issued on the first day of the month on the foreign exchange market as a standard, being accounted on the basis of exchanged standard money. At end of each month, adjust the pecuniary resources and items with respect to money debtor and creditor account on the balance sheet under the price of that day on the foreign exchange market. The market benchmark rate on the same day when business is conducted is adopted for the exchange rate of foreign currency. As for any project involved in foreign currency, the balance of the foreign currency is exchanged to RMB in accordance with the market benchmark rate at the end of the year. The balance between the exchanged RMB amount at the end of the year and the original carrying amount, which is related to the fix assets construction or purchase, shall be capitalized, and which is related to production and operation shall be counted into financial costs. 44 Determination standard of cash and cash equivalents Cash equivalents refer to a kind of investment that has a short duration of repayment (within 3 months), mobility and low risk of price change, and is easy to be changed into a certain known amount of cash. Financial Instruments Financial Assets Classification, Recognition and Measurement —— Four sorts are divided by the Company in the initial recognition: transaction financial assets, loan and receivables, available-for-sale financial assets, and held-to-maturity investments. Carry out and evaluation at each end of term. For initial recognition of financial assets, fair value is adopted. As for transaction financial assets, related transaction costs are included in the current profit and loss. For other types of financial assets, related transaction costs are included in the initial amount identified. —— Transaction Financial Assets. Including the assets that the Company intends to sell in the near future at the fair value as a short-term profit gaining model, and its extended financial portfolio of assets, and derivative financial assets (designated as effective hedging tool for derivatives, financial guarantee contracts are derivatives, and not in an active market in the Price and its fair value can not be reliably measured linked to the interests of investment tools and are subject to the delivery settled equity instruments except derivatives.) Transaction financial assets are accounted at the fair value after trading and the profit or loss arising from change of faire value is accounted in the current profit and loss. —— Loan and Receivables: The Company would take those assets that have not return from the active market, fixed return amount or determined non-derivative financial assets to be loan and receivables, Which is measured in accordance with real interest rate after amortized cost. Any gaining or loss after termination or when value is reduced or when amortizing, is accounted in the current gains and losses. —— Available-for-sale Financial Assets: The Company’s such assets refer to non-derivative financial assets that are designated in the beginning to confirm available-for-sale financial assets, in addition to loans and receivables and held-to-maturity investment, and other non-derivative financial assets out of financial transactions assets, which is follow up measured at fair value of the profits or losses arising from fair value change, and is directly accounted into the owner's equity, until the termination of such financial assets being confirmed, or is accounted into current gains and losses when fair value is reduced. As the change of holding wills or holding capacity, air value could not be no longer calculated reliably, or the holding time has exceeded two entire fiscal years and fair value calculation becomes reasonable, such assets are measured by the Company based on amortized cost. The book value of such financial assets is taken as amortized cost. Related gains or losses of such financial assets that are originally calculated into directly owners' interests are treated as the following two models: ① For the financial assets that have a fixed maturity date, actual rate amortization method is adopted for the rest period and is accounted into the current gains and losses. For the difference between amortization costs and amount at the date of maturity, actual rate amortization method is adopted to account into current gains and losses. If occurring a value reducing in the following up later years, roll out related gains and losses of the owners’ interests and directly included in the current profits and losses. ② As for the financial assets that have no fixed deadline, take those as the owner's equity until the financial assets in the subsequent accounting period or termination of impairment occurred during the confirmation transferred, included in current profit and loss. —— Held-to-maturity Investments: The Company divides the non-derivative financial assets that the management has a clear intention and has ability to hold to maturity, and has a fixed maturity date, and has a fixed return amount, to be held-to-maturity investments. For such assets, maturity investments in real interest rates, while sharing the cost to conduct a follow-up measurement, the termination of confirmed or amortization, impairment in the profits or losses, gains and losses included in the current period. 45 held-to-maturity investment of the sale or re - Categories amount, so that the remaining part of the investment is still as held-to-maturity investment is not appropriate, the rest of the investment will be re-classified as available-for-sale financial assets, and to re-classification of the fair value of the carry-over, and in this fiscal year and after two full fiscal years, no longer the financial assets classified as held-to-maturity investments. in the weight classification, the remaining part of the investment cost more than its share of the difference between the fair values and included all the rights until the termination of financial assets available for sale to confirm or to the impairment occurred, included in current profit and loss. Classification, Recognition and Measurement of Financial Liabilities — For initial recognition of financial liabilities, the Company divides it into two categories as follows: Transaction financial liabilities, and other financial liabilities. The former of which is included in the fair value and related costs are included in the current gains and losses; and the later of which of related costs are included in initial recognition amount. — Trading Financial Liabilities: Which refers to financial liabilities and financial liabilities and derivative financial liabilities that the Company for the repurchase fair value in the recent period for short-term profit gaining, model portfolio management tool (designated as effective hedging tool for derivatives, financial guarantee contracts are derivatives, and not in an active market in the Price and its fair value can not be reliably measured linked to the interests of investment tools and are subject to the delivery settled equity instruments except derivatives.) which are included in the current gains and losses based on the change of fair value — Other Financial Liabilities: Effective interest method and amortized cost are adopted for other financial liabilities; gains and losses generated from follow-up measurement of termination confirmation and amortization are included in current gains and losses. Confirmation of Fair Value of the Equity Instruments — For financial instruments existed in active market, which fair value is determined according to market price; for the financial instruments existed in non-active market, estimation is adopted to determine its faire value. And the estimation include current transaction of each party in the familiar markets and essential the same other faire values of financial instruments and currency flow analysis and black-Scholes option pricing model. Impairment Test of financial assets and declining-balance method —The Company checks book value of trading financial assets on the date balance sheet is made, as for the financial assets that have objective evidences to show the financial assets impairment occurred, aforesaid difference against the impairment provision. ——Measurement of financial assets impairment measured on basis of amortized cost If there is objective evidence to show that financial assets based on amortized cost are reducing, reduce book value of such assets to foreseen future the present value of cash flow (excluding the future credit losses), the amount accounted is the loss amount of assets, which are included in current gains and losses. Impairment test is adopted for the major assets separately. For non-big amount of financial assets individual or a combination of impairment testing, does not exist have been identified by The value of objective evidence of the amount of individual assets, again with similar credit risk characteristics of financial assets constitute a combination of impairment testing, has been the basis of a single Provision for impairment of financial assets in the portfolio will no longer be tested for impairment. in the follow-up period and, if objective evidence shows that the value of financial assets has been restored, and with the objective to confirm the loss in respect of matters occurring after the original recognized impairment losses should be reversed, the gains 46 and losses included in the current period. after it back The book value should not exceed Provision for impairment assuming no circumstances under which financial assets in the back, I share the cost. measured by share of the financial costs more than the actual loss of assets, and reduces related provision for impairment has been prepared. ——Available-for-sale Financial Assets If there is objective evidence to show that available-for-sale financial assets are reducing, even if the termination of such financial assets has not reached, the cumulative decline in a loss for owners directly included in the current gains and losses. The cumulative decline loss is the initial cost of such assets, deducted the amount of recovery and amortization, fair value when impairment occurs and net value of the original in the profit or loss. Standards an Provisions on Receivables Bad Debts — Bad debts are confirmed based on the following principles: — Uncollectable claim in the event that debtor’s bankruptcy after legal proceedings; — Debtor’s death that causes debt rights failure; — Debtor dose not fulfill obligations for three years and there is conclusive evidence to show that the recovery of claims is impossible, it may be listed to be bad debt after being approved by board of directors. — Allowance method is adopted for bad debts, and the provisions are as follows: — If at the end of term there is objective evidence to show receivables impairment, reduce its book value to future cash flows, and the amount is recognized as an asset impairment losses, included in the current gains and losses. The future present value of cash flow forecasted is determined on the basis of the original effective interest rate discounted (excluding credit losses that have not yet occurred), in addition to values of related guaranty. The original effective interest rate is the rate that is determined in the initial recognition of the receivable. As for short-term receivables there is small difference between forecasted future cash flow and present value, so there is no forecasted future cash flow discounted. — Impairment test separately to the receivable that has significant amount is required. If there is objective evidence to sow impairment of its occurrence, confirm its impairment loss and bad debts in accordance with its book value balance that is lower than future present value of cash flow. The significant amount refers to receivable balance that ranks the top five or accounting for 10 percent receivables in total. — If there is objective evidence to show impairment of a single non-major receivable, carry out impairment test and confirm impairment loss and provision for bad debt. For other individual non-significant amount of receivables, confirm its impairment loss and drawing bad debts provision on the basis of actual loss ratio of accordance receivables of prior year, and 6% present end balance of receivables (excluding consolidated financial statements of the exchanges between enterprises of internal funds.) Accounting Method of Inventory Inventory Category: Raw materials, products in processing, commissioned processing materials or finished products or semi-finished and consumables. Inventory accounting: the inventories of the Company shall be made a daily accounting in the light of the planned cost. Where the inventories shall be measured in the light of the planned cost when obtained and outgone, and the cost difference shall be allotted month by month. Inventory system: a perpetual inventory system is adopted. Inventory Decline and Provision：In accordance with the individual inventory items to be lower than the net value of the difference between the cost of carrying inventory provision for decline in value. Finished 47 products and materials for the sale can be used directly in the sale of the stock to the stock estimated selling price minus the estimated cost of sales and related taxes and fees after the amount of its net realizable value; need to go through the processing of materials inventory, production of finished products to the estimated selling price less the completion of the estimated cost will be , it is estimated that the cost of sales and related taxes and fees after the amount of its net realizable value. Accounting Method on Long-term Investment Long-term equity investment valuation —Long-term equity investment arising from corporate merger —As for the merger of the same type, the initial investment cost is taken according to the book value of long-term cost, and related cists directly are included the current gains and losses. —As for the merger of non-same type, the merger costs for the purchase of the Company in order to obtain control of the other party to pay the assets or liabilities and commitments issue of the rights and interests of the fair value of securities for the conduct of a corporate merger. Directly related to the costs included in cost of the investment. Contract or the merger agreement may affect the future costs of the merger agreement to purchase, if the estimate of future issues is likely to occur and the impact of the merger costs can be a reliable measurement of the amount of the Company shall be included in its cost of the investment. —Long-term equity investment based on currency payment. Take actual purchase price as the initial costs that include directly related costs with respect to long-term equity gaining, taxes and other necessary expenses. —Long-term equity investments based on issuance of equity securities. Take faire value of equity securities issued as initial investment cost. —Long-term equity investments invested by investors. Take value provided in the contract as initial investment cost, but except the value that is not fair. —Long-term equity investment based on non-monetary assets exchange (commercial-type exchange). Take fair value of such investment and related taxes as investment costs. —Long-term equity investment gained from debt restructuring. Creditor has the rights to share faire value of such share of the debtor's investment. Follow-up measurement and revenue recognition on long-term equity investment —Absorption costing method is adopted for the long-term equity investment that the Company is able to control, and the investment that can not be controlled by the Company, and major investment that there is no return from the market and it is impossible to measure its faire value. The cash dividends or net profit distribution declared by the invested organ is included in the current profit, but is limited to accumulative net profit distribution, the long-term investment that can be controlled by the Company, and fair value can not be reliably measured by the cost of long-term equity investment method. declared to be distributed by the investment of cash dividends or profits recognized as current investment income, but only Investment units to be accepted after the total investment in the net profits of the quota. —Corporation's investment units have joint control or significant influence of the long-term equity investment by the equity method. Long-term equity investment than the initial investment cost of investment to be enjoyed by the investment unit fair value of identifiable net assets share, not adjusted long-term equity investment in the initial investment cost long-term equity investment is less than the initial investment cost of investment to be enjoyed by the investment unit fair value of identifiable net assets share, and its variance included in the current loss, while the long-term equity investment costs. confirmed by the investment units in a net loss to long-term equity investments and the book value of investments was essentially a unit of the long-term interests of net investment is reduced to zero. limit (the Company has to 48 bear the additional losses with the exception of obligations). confirmation should be Investment units to be the share of net profit or loss when the investment was to achieve the investment units to the fair value of identifiable assets based on the investment unit's net profit was adjusted for confirmation - Company to be invested units with a common control or significant impact on the long-term equity investment by the equity method. long-term equity investment than the initial investment cost of investment to be enjoyed by the investment unit fair value of identifiable net assets share, and not the long-term equity investment of the initial investment cost, long-term equity investment is less than the initial investment cost of investment to be enjoyed by the investment unit fair value of identifiable net assets share, and its variance included in the current loss, while the long-term equity investment costs. confirmed by the investment units in a net loss to long-term equity investments and the book value of investments was essentially a unit of the long-term interests of net investment is reduced to zero. limit (the Company has to bear the additional losses with the exception of obligations). should have been recognized in the investment unit share of the net profit or loss, investment to be made of the investment units to the fair value of identifiable assets based on the investment unit's net profit was adjusted for confirmation. Impairment of long-term Investment —At the end of reporting period, the Company shall check each item of the long-term investments. If the recoverable amount of the assets are less than book value as market price declines or the Company invested runs business weak, and it is impossible to be recovered within the future period forecasted, take the difference of long-term investment of book value as the impairment provision. The recoverable amount in accordance with the fair value of assets minus the net cost of disposal of assets and expected future cash flows are the two values identified between higher. a long-term investment impairment losses recognized, and in the subsequent accounting period may not be back - Company in the end of the reporting period on the long-term investment itemized check, if the market value continued to decline due to investments or units operating conditions worsening reasons for its recoverable amount lower than the book value, and this could reduce the value of the estimated future period not restored, the recoverable amount will be lower than the long-term investment in the difference between the book value as a long-term investment for impairment. Recoverable according to the amount of the fair value of assets minus the net cost of disposal of assets and expected future cash flows between the present values of the higher determined. long-term investment impairment losses recognized, and in the subsequent accounting period shall not be reversed. Fixed Asset Valuation and Depreciation Methods Fixed asset criteria: company’s fixed assets are defined as the tangible assets for production and services, lease or management, which has more than one year of life-span for use, and has a higher unit value. Classification of fixed assets: buildings, machinery and equipment, transport equipment and other equipment. Fixed asset valuation and depreciation methods: Fixed assets at actual cost and straight-line method are adopted in accordance with the estimated economic life of fixed assets and the projected net residuals depreciation rate. Various estimated economic life of fixed assets and depreciation rates are as follows: Categories Useful life Yearly depreciation rate Residuals rate Housing and building 3—25 31.67%-4.75% 5% Machinery and equipment 2—8 47.50%-11.88% 5% Transportation equipment 5—10 19%-9.50% 5% Other equipment 2—8 47.50%-11.88% 5% 49 Fixed assets impairment provisions: The Company shall carry out check to each fixed asset at the end of term. If the recoverable value is less than book value because of market price decline, aged technologies, damage or long-time idle, the difference is adopted for its impairment provisions, which can not be returned as of being confirmed. Recoverable amount in accordance with the fair value of assets minus the net cost of disposal of assets and expected future cash flows of the present value identified between higher. future cash flows of assets is the value of assets in accordance with the sustainable use of process and the final disposal of produced by the estimated future cash flows, select appropriate discount rate for its discount rate after the to be determined. fixed assets for impairment: in the end of the reporting period on fixed assets itemized check, because if the market value continued to decline, or technological obsolescence, damage and long-term idle, and other factors, led to the recoverable amount of fixed assets below their book value, according to the difference Provision for impairment of fixed assets, an impairment loss of fixed assets identified, and in the subsequent accounting period shall not be reversed. recoverable amount in accordance with the fair value of assets minus the net cost of disposal of assets and expected future cash flows between the present values of the higher determined. future cash flows of assets is the value of assets in accordance with the sustainable use of process and the final disposal of produced by the estimated future cash flows, select appropriate discount rate for its discount After the amount to be determined. Accounting Methods for Construction-in-progress Actual cost is take as a base for construction-in-progress. And it is transferred to be fixed assets when it reaches usable statue estimated at the provisionally estimated price. After final accounts of project, adjust book value according to actual cost. Purchase or construction of the production line with the conditions of capital assets specialized lending or borrowing of the general occupation of the borrower and the borrower interest in supporting specific borrowing costs in the purchase or construction of the production line with the conditions of capital assets can be used or can be scheduled for sale by the state before can be included in the amount of capital assets cost was included in the current loss. construction - in-progress at actual cost, and can be used to target by state temporarily transferred to the fixed assets valuation in the accounts for completion, according to the actual cost of adjusting the book value of fixed assets. acquisition or construction or the production of capital assets and the conditions of the specialized lending or borrowing of the general occupation of the borrower and the borrower interest in supporting specific borrowing costs in the purchase or construction of the production line with the conditions of capital assets can be used or can be scheduled for sale Before the state can be on the amount of capital assets included in the cost was included in the current loss. Impairment Provisions for Construction-in-progress: The Company shall carry out a comprehensive check to construction-in-progress at the end of each term. As for the project-in-progress that has been stopped for a long time and can not be continued restarting in the future 3 years, and there is no a certain value whatever in economic benefits or technical performance, or there is obvious evidence that may show the construction-in-progress impairment occurred, the impairment provision is based on the difference that thee recoverable amount less than book value. Once impairment loss of construction-in-progress is confirmed, it can not be reversed. Valuation of Intangible Assets and Amortization Method Valuation of intangible assets —Cost of purchased intangible assets is accounted on the basis of actual expenditure of such assets when reaching its expected usage. 50 —Expenditure in internal research and development phase. It would be valued into the current gains and losses when it occurs. As for the expenditure that may meet the conditions of capitalization, it shall be considered to be intangible asset cost. —Intangible assets invested by investors. It would be valued under relevant provisions in the contract, but except those that are unfair. —Intangible assets accepted from debtor's non-cash assets or that replacement of receivable claims shall be valued in accordance with the fair value. —Intangible assets in non-monetary transaction shall be valued in accordance with its fair value and its related tax costs. Amortization of intangible assets: As for intangible assets that have the limited life-span, straight-line amortization within its life-span is adopted. As for intangible assets that are impossible to be estimated for their future economic interests to the Company, it is considered to be intangible assets that have unpredictable life-span, upon which amortization is not carried out. As for the intangible assets, land use, the life-span is 50 years for average amortization. Impairment Provisions for intangible assets: It is required to conduct a comprehensive check to such intangible assets at the end of term. For the intangible assets that have already been replaced by new technology and its ability to create benefits for the Company suffered a great impact, or a significant decline of market price and impossible to be covered within its remained life-span, or the duration is out of protection by law, yet a certain utility value remained, or there is obvious evidence that may show the construction-in-progress impairment occurred, the impairment provision is based on the difference that thee recoverable amount less than book value. Once impairment loss of construction-in-progress is confirmed, it can not be reversed. Accounting Methods on Long-term Deferred Expenses Long-term deferred expenses refers to expenses paid but attributable to the current and subsequent accounting periods shall be accounted for as deferred charges or deferred expenses more than 1 year. Long-term deferred expense shall be recorded into book in the light of the actual expenditure, and amortized averagely in the light of straight-line method within benefit period. As for the long-term prepaid item that can not benefit future accounting, transfer all their remained value to the current gains and losses. Capitalized Accounting Method on Borrowing Capitalized the borrowing that meet the following conditions ： Expenditure to acquire (including expenditure for the acquisition or construction or production line with the conditions of the capital assets to pay cash, or transfer of non-cash assets to bring in the form of interest-bearing debt expenditures) that has occurred; borrowing costs has occurred; and for assets intended use or sale of the state may be necessary for the acquisition or construction or production activities have already begun. Capitalized amount of borrowing interest: For purchase or construction of the production line with the conditions of capital assets and borrow specialized loan borrowers or occupier of the general interest in the borrower, in the purchase or construction of the production line with the conditions of capital assets can be used or can be scheduled Before the state sales, according to the following methods of determining the amount of capital: the capitalization of interest on the amount of the borrower: purchase or construction of the production line with the conditions of capital assets and borrow specialized loan borrowers or occupier of the general interest in the borrower, in the acquisition or construction or production comply with the 51 conditions of the capital assets can be used or can be scheduled for sale before the state, according to the following methods of determining the amount of capital: — Or borrowing that is for acquisition or construction of the production line with the conditions of capital assets and borrow specialized lending, specialized lending to the current actual interest costs, net borrowing will be used has yet to deposit funds in bank interest income or the temporary investment income defined as the amount of capital should be the cost - or for the acquisition or construction of the production line with the conditions of capital assets and borrow specialized lending, specialized lending to the current actual interest costs, less will be the borrower of funds not yet spent Interest income deposited in the bank or temporary investments of the amount of investment income should be defined as the cost of capital. —Or for the acquisition or construction of the production line with the conditions of capital assets and occupy the general borrowing, the Company According to the cumulative capital expenditure over specific borrowing part of the capital expenditure multiplied by the weighted average number of borrowers generally occupied by the capitalization rate to calculate the borrower determine general should be the capital of the amount of interest. Capitalization rate borrowers under the general calculation of the weighted average interest rate determined. Suspension of capitalization: In the event the capital assets acquired or constructed in the course of production is interrupted for over a continue three months, it is required to suspend capitalization of borrowing such borrowing. And during the interruption the borrowing is recognized as costs, reckoned in the current gains and losses till restarting of production. If the interruption is for purchased or produced in line with the conditions of the capital assets or sale of state can be the necessary procedures, or capitalization of borrowing costs, it is required to keep capitalization process of such borrowing. Employee Emolument Employee Emolument include various forms of compensation, salaries, bonuses, allowances, subsidies and trade unions benefit costs, employee benefits , medical insurance for employees, aged insurance, unemployment insurance, work-related injury insurance, maternity insurance, and other social insurance and housing accumulation fund, etc., in the accounting period. In the labor contract expires before the lifting of the trade unions and labor relations, or to encourage the workers to accept cuts to voluntary compensation recommendation (to dissolve labor relations plan or proposed cuts to be implemented, and the enterprises can not unilaterally withdraw), the companies confirmed The resulting projected liabilities, included in expense in the current period. Revenue Recognition Principle Company has products, commodities, the main ownership of the risks and rewards transfer to the buyer, the Company no longer the products, commodities, the right to continue to manage the implementation and practical control of the related revenue has been received or receivable has been made effective documentation, and with sales of the product, commodity-related costs can be measured reliably, recognized the achievement of sales revenue. Work completion percentage is adopted for income by providing labor services in the following conditions: If the income amount can be reckoned clearly； if transaction related economic interests can be flown in; If transaction completion in progress can be determined reliably. In the event that costs in transaction process or in the future can be measured reliably；and if results of transactions of labor service providing can no be measured reliably and labor costs occurred can be compensated, revenue is recognized according to labor costs already occurred. If labor cost occurred can not be fully compensated, the amount recognized for 52 labor cost is base on the amount that can be recognized. In the event that no labor cost can be compensated fully, no revenue is recognized. Revenue gained by providing others company's assets may be recognized if it meets the conditions as follows: income related to transaction can be flown into the Company; the amount of revenue can be measured reliably. As for the revenue gained by providing company’s assets shall be reckoned under relevant provisions in contract. Government subsidy No government subsidy may be recognized unless the following conditions are met simultaneously as follows: ① The enterprise can meet the conditions for the government subsidies; and ② The enterprise can obtain the government subsidies. If a government subsidy is a monetary asset, it shall be measured in the light of the received or receivable amount. If a government subsidy is a non-monetary asset, it shall be measured at its fair value. If its fair value cannot be obtained in a reliable way, it shall be measured at its nominal amount The government subsidies pertinent to assets shall be recognized as deferred income, equally distributed within the useful lives of the relevant assets, and included in the current profits and losses. But the government subsidies measured at their nominal amounts shall be directly included in the current profits and losses. The government subsidies pertinent to incomes shall be treated respectively in accordance with the circumstances as follows: Those subsidies used for compensating the related future expenses or losses of the enterprise shall be recognized as deferred income and shall included in the current profits and losses during the period when the relevant expenses are recognized; or Those subsidies used for compensating the related expenses or losses incurred to the enterprise shall be directly included in the current profits and losses. Accounting Methods on Income Tax Balance sheet debt accounting is adopted for income tax. On the date that the balance sheet is made, the Company recognizes, according to results of deductible temporary differences and income tax rate, deferred income tax assets and corresponding deferred income tax income, and deferred income tax liabilities and its corresponding deferred income tax expense. Profit Distribution Method Under the corporate by-law, corporate profits distribution shall be carried out in order as follows: —Make up losses in the previous year; —Extracting 10 percent statutory provident funds and the extraction can not be continued no longer when accumulated amount reaches 50% registered capital; —Extraction of optional accumulation fund can be carried out as of being approved by General Assembly; —The remained profit can be distributed as of being approved by General Assembly; Preparation Method for Consolidated Financial Statements Company takes all subsidiaries and branches into the consolidated range. The consolidated financial statements include the financial statements of parent company and individual financial statements of each subsidiary and other relevant information. Any investment and internal exchange among parent company and its subsidiaries, affiliates, shall be consolidated one by one, after all internal transaction are neutralized. In the event accounting policies adopted in the subsidiaries are different from the parent companies, merging shall be carried out under the accounting policies of the parent company after adjustment which shall under the standard of the parent company. 53 V. M a j o r Ta x e s VAT VAT of ales is 17% total sales income, according to the reference input tax deduction to allow deductions for the payment of the difference between the company export approval of the taxation departments since January 1, 2002 under the policy of tax exemption, crediting and return. Business Income Tax The Company was identified as a high-tech enterprise in December 2008, and obtained the “Certificate of High-tech Enterprise” with serial number GR200844000085 after approval by Department of Science and Technology of Guangdong Province, Department of Finance of Guangdong Province, Guangdong Provincial Bureau of State Taxatio and Guangdong Provincial Bureau of Local Taxationon on 16 Dec. 2008. In accordance with relevant provisions in Income Tax Law of the People's Republic of China and the Administration Measures for Identification of High-tech Enterprises promulgated in 2007, the Company enjoy a 15-percent rate for corporate income tax within three years since 1 Jan. 2008. The subsidiaries of the Company, including Foshan Taimei Times Lamps and Lanterns Co., Ltd., Foshan Chansheng Electronic Ballast Co., Ltd. and Foshan Chanchang Electric Appliance (Gaoming) Co., Ltd., are all productive foreign funded enterprises, so that the said three companies enjoy a preferential CIT policy of “Two plus three” (Exemption of enterprise income tax for the first two years of making profit, and 50% tax reduction for following three years). Of which, year 2007 is the first profit-making year that Foshan Taimei Times Lamps and Lanterns Co., Ltd. enjoys the said preferential policy of “Two plus three”, therefore, it should be exempted from the enterprise income tax in 2008. Foshan Chansheng Electronic Ballast Co., Ltd. enjoyed the said preferential policy of “Two plus three” since 2004, thus it should be allowed a 50 percent reduction in 2008. As at 31 Dec. 2007, Foshan Chanchang Electric Appliance (Gaoming) Co., Ltd. failed to enjoy the said preferential CIT policy, in the light of relevant provisions of the Notice concerning Carrying out the Transitional Preferential Policies on Corporate Income Tax (GF [2007] No. 39 document), it started to enjoy the said preferential policy of “Two plus three” from 2008, therefore, the said company should be exempted from the enterprise income tax in 2008. 54 VI. Subs idi a rie s c ontro l led by the C o mpa n y General information of the shareholding subsidiaries Shareholding subsidiaries ended 31 Dec. 2008 (of which, Prosperity (Nanjing) Lighting Components Co., Ltd. is a subsidiary obtained through enterprise combinations not under the same control, all others are subsidiaries set up by investment by the Company) Amount Registered invested by Name of invested Date of Registration Equity Legal Consolidated capital the Main business company foundation place owned representative statement (RMB’0000) Company (RMB’0000) Foshan Chanchang Manufacturing bromine Lighting tungsten-arc lamps, special lighting 1989 Foshan USD180 USD72 40% Zhong Xincai Yes Components Co., source products and ancillary Ltd. devices Foshan Chansheng Manufacturing electronic ballasts, Electronic Ballast 2003 Foshan RMB100 RMB75 75% Zhong Xincai electronic transformers, electronic Yes Co., Ltd. triggers. Foshan Modern Research, development, Lighting Co., Ltd. production and sales of lighting 2004 Foshan RMB500 RMB450 90% Qu Muben appliances and household Yes appliances and accessories and other lighting products Foshan Chanchang Production and operation of lamps, Electric Appliance electric light source products and (Gaoming) Co., Ltd. 2005 Foshan RMB6000 RMB4200 70% Zhong Xincai accessories, installation and Yes related engineering consulting business. Foshan Taimei Research, development, Times Lamps and production, sales of lighting, Lanterns Co., Ltd. 2005 Foshan RMB50 RMB35 70% Qu Muben household appliances and Yes accessories and other lighting products. Foshan Gaoming In-progress of founding (tourist Fuwan Landscape industry, catering service, sauna, Resort Co., Ltd. 2006 Foshan RMB480 RMB480 100% Zhong Xincai foot-bathing, games, retail of Yes beverages, sports on the water, chess) Prosperity (Nanjing) Production of energy-saving Lighting photoelectric source products, Components Co., lamps and lanterns, light source Ltd. equipments, illumination 2002 Nanjing RMB4168.32 RMB7200 100% Zhuang Jianyi Yes engineering; technological development of energy-saving and production of relevant components; sales of self-production products 55 —Foshan Chanchang Lighting Components Co., Ltd. was founded in 1989, and the company holds 40% of its shares. Under relevant provisions in the agreement between the company and Foshan Chanchang, the company owns the rights of essential holding. So it was taken into the consolidated financial statements. In accordance with the resolutions of board of directors of Foshan Chanchang, the company shall take charge of its management and the benefits gained this year shall be distributed on the basis of ratio of contributions. Owing to expiration of the term of the joint venture ended 30 Nov. 2008, the Board of this company decided to terminate its operation. Relevant liquidation matters are in progress. — Foshan Chanchang Electric Appliance (Gaoming) Co., Ltd. Is a sino-foreign joint ventures invested by the company and Prosperity Lamps and Components Co., Ltd, approved by Foreign Trade and Economic Cooperation Bureau of Gaoming District, Foshan (No. 79-2005) on August 23, 2005? And the company holds 70% shares and it has been taken to be consolidated financial statements since its founding. The company started running business since 2006. —Foshan Taimei Times Lamps and Lanterns Co., Ltd. (the former name of FSL Times Lamps and Lanterns Co., Ltd.) is a company invested by our company and Rebecca North American Investment Inc, a sino-foreign joint ventures, approved by Foreign Trade and Economic Cooperation Bureau of Gaoming District, Foshan (No. 97-2005) on December 5, 2005, obtained its business license. And the company holds 70% shares and it has been taken to be consolidated financial statements since its founding. The company put into production since 2006. —Foshan Gaoming Fuwan Landscape Resort Co., Ltd. was invested by the company and it was founded on November 23, 2006, obtaining its business license, And the company holds 70% shares and it has been taken to be consolidated financial statements since its founding. The company started running business since December 20, 2006. —Prosperity Lighting Components Co., Ltd., in accordance with the Equity Transfer Agreement signed with the Company on 27 Aug. 2008, transferred its 100% equity of Prosperity (Nanjing) Lighting Components Co., Ltd. to the Company. Therefore, Prosperity Nanjing became the wholly-owned subsidiary of the Company. Change of consolidation scope and reason As above mentioned, in accordance with the Equity Transfer Agreement signed between the Company and Prosperity Lighting Components Co., Ltd. on 27 Aug. 2008, the Company acquired 100% equity of Prosperity (Nanjing) Lighting Components Co., Ltd. (hereinafter call Prosperity Nanjing) held by Prosperity Lighting Components Co., Ltd., and paid relevant payment for equity transfer in Dec. 2008 as stipulated in the agreement, as a result, Prosperity Nanjing became the wholly-owned subsidiary of the Company. On the basis of the relevant provisions in Accounting Standard for Business Enterprise No. 33 – Consolidated Financial Statement, with regard to enterprise combinations not under the same control, the Company consolidated the balance sheet as at 31 Dec. 2008 of Prosperity Nanjing when preparation of consolidated balance sheet, while did not adjust the amount as at 31 Dec. 2007 in the Balance Sheet. In view of that the equity merger date is December 2008, the Company did not consolidate income statement and cash flow statement of Prosperity Nanjing when preparation of consolidated financial statement. Main financial highlights of Prosperity Nanjing as at 31 Dec. 2008: 56 Items 31 Dec. 2008 Total assets 85,791,166.19 Total liabilities 12,669,118.27 Net assets 73,122,047.92 — Minority interests and profits and losses of minority shareholders of controlling subsidiaries 2008 2007 Minority Profits and Minority Profits and losses Name of companies interests losses of interests of minority minority shareholders shareholders Foshan Chanchang Lighting Components Co., Ltd. 10,808,035.51 1,167,687.70 9,640,347.81 2,785,579.40 Foshan Chansheng Electronic Ballast Co., Ltd. 1,277,723.27 501,731.67 1,234,782.78 713,635.61 FSL Modern Lamps and Lanterns Co., Ltd. 648,885.64 26,036.66 622,848.98 3,783.79 Foshan Chanchang Electric Appliance ( Gaoming) Co., Ltd. 17,383,684.92 -543,653.43 17,927,338.35 -48,090.80 Foshan Taimei Times Lamps and Lanterns Co., Ltd. 856,747.74 134,053.43 1,785,760.95 1,723,520.02 Total 30,975,077.08 1,285,856.03 31,211,078.87 5,178,428.02 57 VI I. Not es t o Ma in Ite m s of Consol i da te d F ina nci al Sta te me nts 1. Monetary Funds 31 Dec. 2008 31 Dec. 2007 Items Original currency Exchange Converted into Original currency Exchange Converted into amount rate RMB amount rate RMB Cash 49,105.08 39,574.38 Bank deposits —RMB Account 860,207,563.79 1,044,819,785.45 —HKD Account HKD90.28 0.8819 68.30 - —USD Account USD7,378,953.62 6.8346 50,431,706.69 USD6,504,882.01 7.3046 47,515,561.12 —Euro Account EUR 18,665.64 9.6590 180,291.42 EUR524,014.63 10.6669 5,589,611.66 Other currency 17,000,000.00 113,852.50 funds Total 927,868,735.28 1,098,078,385.11 —All bank deposits are in the name of the Company or the subsidiaries which are within the scope of consolidated financial statements. —Other currency funds are futures margin of forward exchange amounting to RMB 17 million, which is deposited in designated bank account. 2. Tradable Financial Assets Items 31 Dec. 2008 31 Dec. 2007 Stock investment - - Fund investment - 107,217,672.71 Total - 107,217,672.71 3. Notes Receivable Items 31 Dec. 2008 31 Dec. 2007 Bank acceptance bill 38,410,882.00 34,960,577.14 Total 38,410,882.00 34,960,577.14 — Up till 31 Dec. 2008, there is no undue trade acceptance draft receivable discounted. —No amount due from shareholders who hold 5% or more of the voting rights of the Company is included in the balance of notes receivable. 58 4. Accounts Receivable 31 Dec. 2008 31 Dec. 2007 Items Aging Proportion Provision Withdrawal Proportion Provision Withdrawal Amount Amount (%) forbad debts proportion (%) forbad debts proportion Significant Within 66,455,617.69 28.47% 3,987,337.06 6% 76,547,074.24 33.70% 4,592,824.45 6% single amounts 1 year Insignificant single amounts but with Over 1,664,255.56 0.71% 1,664,255.56 100% - - - significant credit 3 risk years Within 1 year 159,367,996.09 68.27% 9,703,244.21 6% 145,898,818.05 64.24% 8,774,534.60 6% 1-2 years 4,589,949.57 1.97% 60,749.51 6% 1,754,382.41 0.77% 72,381.42 6% Other 2-3 insignificant years 920,465.14 0.39% 55,227.91 6% 2,634,168.17 1.16% 158,050.09 6% Over 3 years 435,237.00 0.19% 26,114.22 6% 299,168.86 0.13% 17,950.13 6% Total 233,433,521.05 100.00% 15,496,928.47 227,133,611.73 100.00% 13,615,740.69 — The total amount of arrearages of the first five units in the closing balance of accounts receivable is RMB 66,455,617.69 Yuan, accounting for 28.47% of accounts receivable balance. — With regard to the balance of accounts receivable with insignificant single amounts, if any objective evidence shows that it has been impaired, such balance shall be classified as the accounts receivable with insignificant single amounts but with significant credit risk after combination in the light of credit risk features. At the period-end, an independent impairment test shall be made on such balance of accounts receivable. Whereafter, the provision for loss on bad debts shall be withdrawn in full in the light of the impairment test result. —See Note IX for details of amount due from shareholders who hold 5% or more of the voting rights of the Company in the closing balance of accounts receivable. 5. Prepayments 31 Dec. 2008 31 Dec. 2007 Aging Amount Proportion（%） Amount Proportion（%） Within 1 year 49,019,883.85 99.00 6,227,415.52 47.83 1-2 years 494,030.00 1.00 328,418.19 2.52 2-3 years - - - - Over 3 years - - 6,464,958.00 49.65 59 Total 49,513,913.85 100.00 13,020,791.71 100.00 — The balance of prepayments has increased by RMB 36,493,122.14 compared with the period-begin, an increase of 280.27%, which was mainly because that Company increased the part of prepayment for goods and project in order to ensure normal supply of raw materials and good progress with Gaoming Fuwan Project. —No amount due from shareholders who hold 5% or more of the voting rights of the Company is included in the balance of prepayments. 6. Other Receivables 31 Dec. 2008 31 Dec. 2007 Items Aging Proportion Provision fo Withdrawal Proportion Provision fo Withdrawal Amount Amount (%) rbad debts proportion (%) rbad debts proportion Significant Within single 1 year 7,690,602.46 16.15% 461,436.15 6% 37,870,304.33 84.47% 2,272,218.26 6% amounts 1-2 years 36,500,000.00 76.66% 2,190,000.00 6% Insignificant single amounts but 106,552.50 0.22% 106,552.50 100% - - - with Within significant credit risk 1 year Within 1 year 2,377,127.27 2.06% 55,451.07 6% 5,531,860.30 12.34% 316,761.05 6% 1-2 years 1,586,453.80 3.33% 94,863.22 6% 327,743.62 0.73% 19,664.62 6% Other 2-3 insignificant years 253,550.67 0.54% 15,213.04 6% 277,977.70 0.62% 16,678.66 6% Over 3 years 494,718.00 1.04% 29,683.08 6% 823,194.83 1.84% 49,391.69 6% Total 49,009,004.70 100.00% 2,953,199.06 44,831,080.78 100.00% 2,674,714.28 —The total amount of arrearages of the first five units in the closing balance of other receivables is RMB 44,190,602.46 Yuan, accounting for 90.17% of the other receivables balance. — With regard to the balance of accounts receivable with insignificant single amounts, if any objective evidence shows that it has been impaired, such balance shall be classified as the accounts receivable with insignificant single amounts but with significant credit risk after combination in the light of credit risk features. At the period-end, an independent impairment test shall be made on such balance of accounts receivable. Whereafter, the provision for loss on bad debts shall be withdrawn in full in the light of the impairment test result. 60 —No amount due from shareholders who hold 5% or more of the voting rights of the Company is included in the balance of other receivables. 7. Inventory 31 Dec. 2008 31 Dec. 2007 Items Provision for falling Provision for falling Amount Amount price price Raw material 65,063,701.07 - 59,327,200.23 - Good in process 7,213,267.32 - 54,076,660.34 - Consigned materials for processing - - 25,233,538.16 - Finished goods 125,754,902.45 165,352.58 108,722,778.44 - Self-manufactured semi-finished 91,404,649.94 - 34,883,234.41 - products Low value consumables 217,394.00 - 1,118,484.78 - Total 289,653,914.78 165,352.58 283,361,896.36 - 8. Financial Assets Available for Sale Name of Increase in 31 Dec. Investment Number of Nature of invested 31 Dec. 2007 Decrease in 2008 2008 2008 proportion shares stocks enterprise Bank of Communication 511,206,158.54 - 511,206,158.54 - — On 3 Mar. 2008, the Board of Director of the Company examined and approved the resolution on authorizing to dispose the shares of Bank of Communication. Thereafter, the Company sold all shares of Bank of Communication held by it through trading system of Shenzhen Stock Exchange. Ended 31 Dec. 2008, 32,727,667 shares of Bank of Communication held by the Company has been sold out. 9. Long-term Investment 31 Dec. 2007 31 Dec. 2008 Increase in Decrease in Items Provision for Provision for Amount 2008 2008 Amount impairment impairment Stock investment 11,850,000.00 5,850,000.00 - - 11,850,000.00 5,850,000.00 Other equity 69,223,326.04 - 115,009,875.00 1,000,000.00 183,233,201.04 3,298,904.81 investment Total 81,073,326.04 5,850,000.00 115,009,875.00 1,000,000.00 195,083,201.04 9,148,904.81 Details of various types of long-term equity investment are as follows: 61 — Stock investment Proportion in Name of invested Nature of Number of the investee’s Investment Market price as at Provision for enterprise stocks shares registered amount 31 Dec. 2008 impairment capital Shenzhen Corporate Zhonghao 650,000 Below 5% 5,850,000.00 - 5,850,000.00 shares (Group) Co., Ltd. Chengdu Hongbo Corporate 5,000,000 6.94% 6,000,000.00 - - Industrial Co.,Ltd. shares Total 11,850,000.00 - 5,850,000.00 — Shenzhen Zhonghao (Group) Co., Ltd is insolvent, so the total provision for impairment is withdrawn from this investment. — Other equity investment Proportion in the Term of Increase/decrease Provision for Name of invested enterprise 31 Dec. 2007 investee’s 31 Dec. 2008 investment in 2008 impairment registered capital Guangdong Development 500,000.00 Below 5% 500,000.00 - Bank Foshan Branch Foshan Fochen Road Development Company 14,175,627.38 7.66% -1,000,000.00 13,175,627.38 - Limited China Everbright Bank 30,828,816.00 0.29% 30,828,816.00 - Guangzhou Zhujiang Asset Management Company 10,000,000.00 15.38% 10,000,000.00 3,298,904.81 Limited Shenzhen Liangke Venture 50 years 13,718,882.66 18.50% 13,718,882.66 - Capital Company Limited Xiamen Commercial Bank 9.99% 115,009,875.00 115,009,875.00 - Total 69,223,326.04 114,009,875.00 183,233,201.04 3,298,904.81 — Revenue from Foshan Fochen Road Development Company Limited has been recorded into unified collection and allocation system of road-bridge tolls. The Company regards such investments balances as right to earnings, which shall be amortized within the remaining period of business of this company. Durig the reporting period, investment costs of RMB 1,000,000.00 was amortized. 62 — On 12 Jun. 2008, the Company signed the Share Subscription Agreement with Xiamen Commercial Bank Co., Ltd., in which the Company shall subscribe 49,950,000 common shares of such Bank at the price of RMB 2.3025 per share, accounting for 9.99% of total shares of such Bank. — A heavy losses incurred by Guangzhou Zhujiang Asset Management Company Limited in the reporting period, the provision for impairment of long-term equity investment amounting to RMB 3,298,904.81 is withdrawn by the Company in the light of the difference that recoverable amount is lower than carrying value of long-term investment. 10. Fixed Assets and Accumulated Depreciation Items 31 Dec. 2007 Increase in 2008 Decrease in 2008 31 Dec. 2008 Original value of fixed assets Housing and building 502,787,103.31 13,668,804.17 4,613,894.25 511,842,013.23 Machinery equipments 980,942,717.20 100,942,200.58 57,889,864.35 1,023,995,053.43 Transportation 631,830.00 equipments 13,286,522.93 - 13,918,352.93 Other equipment 16,246,780.99 421,894.26 340,093.22 16,328,582.03 Total 1,513,263,124.43 115,664,729.01 62,843,851.82 1,566,084,001.62 Accumulated depreciation: Housing and building 180,967,101.96 26,363,706.99 1,233,162.94 206,097,646.01 Machinery equipments 538,694,442.08 114,497,747.37 53,058,321.08 600,133,868.37 Transportation 1,214,090.91 - equipments 8,088,209.38 9,302,300.29 Other equipment 7,057,979.14 2,565,996.15 271,238.28 9,352,737.01 Total 734,807,732.56 144,641,541.42 54,562,722.30 824,886,551.68 Net value 778,455,391.87 741,197,449.94 — Increase of fixed assets is mainly due to transfer-in from construction in process after completion of installation and testing of such equipment as T5 and T8 fluorescent light production lines and glass furnace, as well as increased original value of RMB 42,099,083.14 and accumulative depreciation of RMB 4,928,398.75 because Prosperity (Hangzhou) Lighting Components Co., Ltd. is brought into the consolidation scope of the Company. —Provision for impairment of fixed assets are as follows: Items 31 Dec. 2007 Increase in 2008 Decrease in 2008 31 Dec. 2008 Machinery 2,043,648.78 - - 2,043,648.78 equipments 63 — The provision for impairment of fixed assets on machinery equipments, which such equipments fail to meet demands of production processes and may result in losses, was withdrawn by the Company. 64 11. Construction in Process Amount transferred into Name of projects 31 Dec. 2007 Increase in 2008 fixed assets Other decrease 31 Dec. 2008 26,571,645.67 849,317.10 - - 27,420,962.77 Fuwan Lighting Industrial Park 12,492,409.34 20,319,659.40 12,653,368.34 - 20,158,700.40 T8, halogen light production line 8,490,000.00 19,698,375.40 12,153,114.64 - 16,035,260.76 T5 fluorescent light production line Staff dormitory and power project of the Fuwan 6,833,784.69 9,146,596.34 2,131,631.59 - 13,848,749.44 Industrial Park 1,019,520.00 6,149,064.00 - - 7,168,584.00 T8 3rd workshop 3,392,038.00 2,192,918.00 - - 5,584,956.00 SAP system software - 4,954,929.95 - - 4,954,929.95 Hard glass furnace Workshop (II) of energy-saving lamps in - 4,296,000.00 - - 4,296,000.00 Fuwan Lighting Industrial Park Flue gas scrubber of glass furnace and 1,969,304.00 2,249,753.22 - - 4,219,057.22 desulphurization system of Gaoming Flue gas scrubber of tank furnace and - 4,215,271.12 - - 4,215,271.12 desulphurization system of Gaoming 1,651,099.80 2,935,407.26 1,139,859.76 - 3,446,647.30 Fugang Restaurant and its supporting facilities 17,126,431.74 4,734,790.40 20,174,955.47 - 1,686,266.67 8# Furnace in Fuwan Lighting Industrial Park 65 Amount transferred into Name of projects 31 Dec. 2007 Increase in 2008 fixed assets Other decrease 31 Dec. 2008 857,676.92 31,113.89 - 54,209.76 834,581.05 Production line of energy-saving lamps Bulbbing machines and feeder machines of 940,800.00 32,058.00 972,858.00 - - Fuwan Industrial Park of Gaoming District 11,958,797.66 18,230,263.02 17,250,492.95 - 12,938,567.73 Other Total 93,303,507.82 100,035,517.10 66,476,280.75 54,209.76 126,808,534.41 —None of the items of projects under construction has any interest to be capitalized and exchange gain or loss. —As at 31 Dec. 2008, the Company never had the need to withdraw provision for impairment of projects under construction. 12. Intangible Assets Transfer out in Amortization in T Types Original amount 31 Dec. 2007 Increase in 2008 2008 2008 31 Dec. 2008 a Land use right 214,654,209.88 143,921,606.27 51,121,379.30 - 3,645,925.99 191,397,059.58 Patent right 200,000.00 123,333.18 - - 20,000.04 103,333.14 Total 214,854,209.88 144,044,939.45 51,121,379.30 - 3,665,926.03 191,500,392.72 — Increase of land use right is mainly from the land use right located in Xiaodian Industrial Zone of Xinxiang, Henan Province, purchase reporting period, and the land use right owned by Prosperity (Nanjing) Lighting Components Co., Ltd., a subsidiary of the Company b scope. —As at 31 Dec. 2008, the Company never had the need to withdraw provision for impairment of intangible assets. 66 13. Long-term Deferred Expenses Original Increase in Amortizatio Term left for Types 31 Dec. 2007 31 Dec. 2008 amount 2008 n in 2008 amortization Rent 4,167,435.60 353,591.42 - 184,464.00 169,127.42 1 years Other 169,704.20 128,939.98 - 60,000.00 68,939.98 2 years Total 4,337,139.80 482,531.40 - 244,464.00 238,067.40 14. Deferred Income Tax Assets and Deferred Income Tax Liabilities Items 31 Dec. 2008 31 Dec. 2007 Deferred income tax assets 17,359,253.59 - Deferred income tax liabilities - 101,817,363.93 — The Company calculates deferred income tax assets and deferred income tax liabilities according to regulations of the Accounting Standards for Enterprises-Income Tax and based on temporary differences. 15. Accounts Payable —The closing balance of accounts payable is RMB 109,342,560.80 Yuan. The amount of items with an age of more than 3 threes is RMB 1,380,576.06 Yuan, which is mainly resulted from the uncertainty as to whether some payments for materials shall be made. —See Note IX for details of amount due from shareholders who hold 5% or more of the voting rights of the Company in the closing balance of accounts payable. 16. Account collected in advance — The closing balance of account collected in advance is RMB 16,065,789.02, an increase of RMB 6,980,516.65 over the period-begin, up by 76.83%, which was mainly because that the Company adopts the method of payment received in advance to new customers for the purpose of controlling risk of payment collection —No amount due from shareholders who hold 5% or more of the voting rights of the Company is included in the balance of account collected in advance 17. Employee Compensation Payable Items 31 Dec. 2007 Increase in 2008 Payment in 2008 31 Dec. 2008 Salary, bonus and allowance 8,768,801.37 199,080,781.35 207,294,584.38 554,998.34 Welfare expense - 15,122,905.64 15,122,905.64 - Equity incentive fund 69,685,877.53 7,000,000.00 40,000,000.00 36,685,877.53 Labor-union expenditure - 1,193,562.32 1,193,562.32 - Social insurance charges 2,010,219.81 10,395,159.77 12,009,117.15 396,262.43 Total 80,464,898.71 232,792,409.08 275,620,169.49 37,637,138.30 — The Company has no default on emoluments payable to staff. 18. Taxes Payable Type of taxation 31 Dec. 2008 31 Dec. 2007 Corporate income tax -2,903,369.60 26,500,254.20 VAT -10,251,310.16 2,406,937.96 Other 2,526,045.73 3,715,371.98 Total -10,628,634.03 32,622,564.14 67 19. Other Payables —The closing balance of other payables is RMB 43,159,960.81Yuan. The amount of items with an age of more than 3 years is RMB 10,819,986.75 Yuan, which is mainly the security deposit paid by agents. — The closing balance of other payables has increased by 17,939,823.26 compared with the period-begin, up by 71.13%, which is mainly due to additional payments for land use right and investment payables. See Note IX for details of the balance of accounts receivable and accounts payable of related parties. —See Note IX for details of amount due from shareholders who hold 5% or more of the voting rights of the Company in the closing balance of other payables. 20. Share Capital Items 31 Dec. 2007 Increase/decrease in 2008 31 Dec. 2008 Shares Capitalizatio subject to Proportion Proportion Number n of capital trading Subtotal Number % % reserve moratoriu m listed I. Shares subject to trading moratorium 1. Shares held by domestic legal persons 4,427,095 0.95% 1,392,360 -1,642,375 -250,015 4,177,080 0.60% 2. Shares held by foreign legal 132,599,39 persons 88,399,594 18.97% 44,199,797 - 44,199,797 1 18.97% 3. Shares held by domestic natural persons 833,736 0.18% 1,700,082 2,566,428 4,266,510 5,100,246 0.73% Total shares subject to trading 141,876,71 moratorium 93,660,425 20.10% 47,292,239 924,053 48,216,292 7 20.30% II. Shares not subject to trading moratorium 1. RMB ordinary 265,072,31 135,139,35 400,211,66 shares 2 56.88% 133,403,888 1,735,467 5 7 57.25% 2. Domesticall y listed foreign 107,250,00 156,885,72 shares 0 23.02% 52,295,240 -2,659,520 49,635,720 0 22.45% Total shares not subject to trading 372,322,31 184,775,07 557,097,38 moratorium 2 79.90% 185,699,128 -924,053 5 7 79.70% III. Total 465,982,73 232,991,36 698,974,10 shares 7 100.00% 232,991,367 - 7 4 100.00% 68 — As approved by the Annual Shareholders’ General Meeting 2007, the Company transferred capital reserve into share capital at the rate of 5 for 10 based on the total share capital of 465,982,737 shares as at Dec. 31, 2007, totaling to 232,991,367 shares. Such capital increase has been verified by the GP Certified Public Accountants with the Capita Verification reports “GKSY Zi [2009] No. 09001340018”. 21. Capital Reserve Items 31 Dec. 2007 Increase in 2008 Decrease in 2008 31 Dec. 2008 Share premium 1,092,148,560.53 - 232,991,367.00 859,157,193.53 Provision for equity investment 4,514.43 - - 4,514.43 Change in fair value 337,068,717.40 - 337,068,717.40 - Other 7,403,887.57 - - 7,403,887.57 Total 1,436,625,679.93 - 570,060,084.40 866,565,595.53 — Decrease of share premium for the current period is caused by the conversion of RMB 232,991,367.00 Yuan of capital reserves to share capital according to the resolutions of the Annual Shareholders’ General Meeting 2007. — Decrease of change in fair value for the current period is because the Company sold its financial assets available for sale, the shares of Bank of Communication, resulting in decrease of the change of the fair value. 22. Surplus Reserves Items 31 Dec. 2007 Increase in 2008 Decrease in 2008 31 Dec. 2008 Statutory surplus reserves 371,440,759.66 - - 371,440,759.66 Discretionary surplus reserve 136,886,568.36 - - 136,886,568.36 Total 508,327,328.02 - - 508,327,328.02 — The Company’s statutory surplus reserves has reached to 50% of paid-up capital, therefore, such reserves shall be not withdrawn in the reporting period. 23. Retained Profit Items 2008 2007 Net profit 224,160,595.11 423,797,425.54 Plus: Retained profit as at 31 Dec. 2007 576,317,365.16 352,684,773.51 Less: Appropriation of statutory surplus reserves - - Appropriation of discretionary surplus reserves - 20,940,704.39 Cash dividends or profits payable 272,599,900.56 179,224,129.50 Retained profit 527,878,059.71 576,317,365.16 Of which: Cash dividends to be distributed 153,774,302.88 272,599,900.56 69 — Cash dividends payable for the reporting period is RMB 272,599,900.56 in total, which is fo rmed in accordance the profit distribution plan approved at the Annual Shareholders’ General Meeting 2007, namely, the Company distributes RMB 5.85 (tax included) in cash for every 10 shares to all shareholders based on total share capital of 465,982,737 shares as at 31 Dec. 20 07. — In accordance with the profit distribution plan for the year 2008 approved by the Board of Directors on 7 Apr. 2009, the Company intents to distribute cash dividend of RMB 2.20 (tax included) for every 10 shares to all shareholders based on total share capital of 698,974,104 as at 31 Dec. 2008, totaling cash dividend of RMB 153,774,302.88 (tax included). The said profit distribution plan needs to be examined by the Shareholders’ General Meeting. 24. Operating Income and Operating Cost — Category of operating income and operating cost is listed as follows: Items 2008 2007 Revenue Cost Revenue Cost Main operation 1,689,541,541.45 1,346,186,864.02 1,461,097,115.67 1,158,494,725.99 Other 29,171,290.62 26,921,204.65 34,975,563.87 31,034,327.62 Total 1,718,712,832.07 1,373,108,068.67 1,496,072,679.54 1,189,529,053.61 — The total amount of sales revenue from the first five customers of the Company is RMB 310,992,096.89 Yuan in 2008, accounting for 18.58% of the total sales revenue of the company. — Breakdown of the revenue of the main operation is as follows: Segment items 2008 2007 Domestic sales 1,029,005,198.84 892,817,491.50 Export sales 644,537,195.78 552,678,080.82 Total 1,673,542,394.62 1,445,495,572.32 —Breakdown of the revenue from hotels is as follows: Items 2008 2007 Revenues from hotels 15,999,146.83 15,601,543.35 25. Taxes and Associate Charges Items 2008 2007 City maintenance and construction tax 7,831,564.42 6,586,331.21 Educational surtax 3,356,384.74 2,823,912.14 Business tax 1,193,113.74 822,985.43 Other 16,022.48 - Total 12,397,085.38 10,233,228.78 26. Administrative expenses Administrative expense has increased by RMB 28,560,527.61 Yuan compared with the same period of last year, up by 34.16%, which was mainly due to increase of labor cost and office overhead along with expansion of business scale. 27. Financial expense Items 2008 2007 Interest expense - - Less: Interest revenue 13,374,189.76 6,918,791.31 Exchange loss 6,463,639.84 8,720,438.48 Less: Exchange gain - - Other 2,030,105.49 1,331,641.99 70 Total -4,880,444.43 3,133,289.16 — Financial expense has decreased by RMB 8,004,490.63 Yuan than 2007, a drop of 255.47%, which was because of increase of interest revenue as well as decrease of exchange conversion loss on foreign currency when fund collection after selling financial assets by the Company. 28. Assets Impairment Losses Items 2008 2007 Loss on bad debts 2,681,722.49 7,213,722.54 Loss on falling price of inventories - - Loss on impairment of investment 3,298,904.81 - Loss on impairment of fixed assets - - Loss on impairment of construction - - in progress Loss on impairment of intangible - - assets Other - - Total 5,980,627.30 7,213,722.54 29. Gains and Loss on the Changes in Fair Value Items 2008 2007 Income from changes in fair value of tradable financial assets -54,117,672.71 20,753,385.38 30. Investment Income Items 2008 2007 Income from stock and fund Investment 164,536,598.88 328,548,994.44 Profits distributed from affiliated or joint venture corporations 1,500,000.00 2,000,000.00 Amortized investment cost of Foshan Road Development Company Limited -1,000,000.00 -1,000,000.00 Total 165,036,598.88 329,548,994.44 —Investment income has decreased by RMB 164,512,395.56 Yuan than 2007, down by 49.92%, which was due to decease of investment in securities market and significant reduction of earnings from stocks and funds invested by idle funds for the influence by securities market fluctuation. 31. Non-operating Income Items 2008 2007 Accounts payable that need not be paid 168,038.97 7,987,055.15 Net income on disposal of fixed assets 1,940,599.50 208,107.85 Government grants 2,116,871.00 Other 2,064,119.98 148,923.74 Total 6,289,629.45 8,344,086.74 32. Non-operating expenses Items 2008 2007 Loss on disposal of fixed assets 3,441,060.19 1,730,609.67 Other 6,646.53 548,311.27 Total 3,447,706.72 2,278,920.94 33. Income Tax Expense Items 2008 2007 71 Items 2008 2007 Income tax payable for the current period 55,829,828.33 76,938,913.50 Deferred income tax expense -6,735,169.96 -4,424,301.24 Income tax expense for the current period 49,094,658.37 72,514,612.26 34. Earnings per Share Items 2008 2007 Basic earnings per share 0.32 0.61 Diluted earnings per share 0.32 0.61 —The above mentioned earnings per share are calculated according to the Rules for the Compilation of Information Disclosures by the Companies That Offer Securities to the Public No.9-Computation and Disclosure of Rate of Return on Common Stockholders’ Equity (revised in 2007). See note 14 for details of the computation process. 35. Other Cash Received Relating to Operating Activities Other cash received relating to operating activities in 2008 are RMB 21,921,018.63 Yuan, main items are as follows: Items Amount Interest revenue 16,045,619.82 Rent 948,648.40 Governmental reward 2,116,471.00 Margins 399,393.35 36. Other Cash Paid Relating to Operating Activities Other cash received relating to operating activities in 2008 are RMB 66,301,388.96 Yuan, main items are as follows: Items Amount Transport charges 27,065,533.33 Testing expense 2,989,331.77 Advertising and general publicity expense 2,892,762.39 Sales commission 2,965,168.71 Support and maintenance, Network Engineering 2,258,310.00 travel charge 2,155,811.93 Financing service charge 1,891,895.74 Donations for afforesting and greening 1,778,443.75 Commodity inspection and customs charges 1,092,880.39 Trademark registration fee 1,001,559.22 37. Other Cash Received Relating to Investing Activities Other cash received relating to investing activities of RMB 7,572,468.07 is cash and cash equivalent held by Prosperity (Nanjing) Light Components Co., Ltd., which it is brought into the consolidation scope in the reporting period. 38. Supplemental information of cash flow statement Supplemental information 2008 2007 1. Transferring net profit into cash flows of operating activities: Net profit 225,446,451.14 428,975,853.56 Plus: Provision for assets impairment 5,980,627.30 7,213,722.54 Depreciation of fixed assets 136,949,186.21 131,994,347.74 Amortization of intangible assets 3,665,926.03 2,851,437.90 Amortization of long-term deferred expenses 244,464.00 837,350.14 72 Supplemental information 2008 2007 Loss on disposal of fixed assets, intangible assets and other 1,500,075.69 1,522,501.82 long-term assets (income is listed as “-”) Losses on change in fair value 54,117,672.71 -20,753,385.38 Financial expense 2,541,288.38 8,720,438.48 Investment losses（income is listed as “-”） -165,036,598.88 -329,548,994.44 Deferred tax – credit item（Less: debt item） -6,735,169.96 -4,424,301.24 Decrease of inventories (increase is listed as “-”) -617,237.28 -60,966,076.30 Decrease in operating receivables (increase is listed as “-”) -6,466,622.42 -128,956,155.96 Increase in operating payables (decrease is listed as “-”) -125,427,497.51 14,257,779.85 Net cash flows arising from operating activities 126,162,565.41 51,724,518.71 2. Net increase in cash and cash equivalents: Balance of cash at the end of the period 927,868,735.28 1,098,078,385.11 Less: Balance of cash at the beginning of the period 1,098,078,385.11 986,916,364.79 Balance of cash equivalents at the end of the period - Less: Balance of cash equivalents at the beginning of the - period Net increase in cash and cash equivalents -170,209,649.83 111,162,020.32 73 VIII. Notes to the Financial Statement of Parent Company 1. Accounts Receivable 31 Dec. 2008 31 Dec. 2007 Items Aging Proportion Provision Withdrawal Proportion Provision Withdrawal Amount Amount (%) forbad debts proportion (%) forbad debts proportion Significant single Within amounts 1 year 66,455,617.69 26.64% 3,987,337.06 6% 76,547,074.24 34.50% 4,592,824.45 6% Insignificant single Over amounts but with 3 1,664,255.56 0.67% 1,664,255.56 100% - - - 6% significant credit risk years Within 1 year 175,402,156.23 70.32% 9,310,062.84 6% 141,409,754.68 63.73% 8,356,208.99 6% 1-2 years 4,541,147.86 1.82% 69,821.41 6% 982,543.16 0.44% 58,952.59 6% Other insignificant 2-3 2,634,168.17 years 920,465.14 0.37% 55,227.91 6% 1.19% 158,050.09 6% Over 3 299,168.86 years 435,237.00 0.17% 26,114.22 6% 0.13% 17,950.13 6% Total 249,418,879.48 100.00% 15,112,819.00 221,872,709.11 100.00% 13,183,986.25 —The total amount of arrearages of the first five units in the closing balance of accounts receivable is RMB 66,455,617.69 Yuan, accounting for 26.64% of accounts receivable balance. — With regard to the balance of accounts receivable with insignificant single amounts, if any objective evidence shows that it has been impaired, such balance shall be classified as the accounts receivable with insignificant single amounts but with significant credit risk after combination in the light of credit risk features. At the period-end, an independent impairment test shall be made on such balance of accounts receivable. Whereafter, the provision for loss on bad debts shall be withdrawn in full in the light of the impairment test result. —See Note IX for details of amount due from shareholders who hold 5% or more of the voting rights of the Company in the closing balance of accounts receivable. 2. Other Receivables 31 Dec. 2008 31 Dec. 2007 Items Aging Proportion Provision Withdrawal Proportion Provision Withdrawal Amount Amount (%) forbad debts proportion (%) forbad debts proportion Significant single Within amounts 1 year 8,746,914.18 15.76% 340,485.63 6% 59,143,770.49 77.80% 2,190,000.00 6% 1-2 years 36,500,000.00 65.78% 2,190,000.00 6% 7,011,478.64 9.22% - 6% Insignificant single 2-3 amounts but with 106,552.50 0.19% 106,552.50 6% - - - 6% years significant credit risk Within 8,439,758.14 373,410.94 1 year 9,087,790.91 13.86% 169,873.24 6% 11.10% 6% 1-2 years 1,692,384.79 3.05% 91,485.48 6% 327,743.62 0.43% 19,664.62 6% Other insignificant 2-3 277,977.70 16,678.66 years 253,550.67 0.46% 15,213.04 6% 0.37% 6% Over 3 823,194.83 49,391.69 years 494,718.00 0.89% 29,683.08 6% 1.08% 6% Total 56,881,911.05 100.00% 2,943,292.97 76,023,923.42 100.00% 2,649,145.91 74 —The total amount of arrearages of the first five units in the closing balance of other receivables is RMB 45,246,914.18 Yuan, accounting for 79.55% of the other receivables balance. — With regard to the balance of accounts receivable with insignificant single amounts, if any objective evidence shows that it has been impaired, such balance shall be classified as the accounts receivable with insignificant single amounts but with significant credit risk after combination in the light of credit risk features. At the period-end, an independent impairment test shall be made on such balance of accounts receivable. Whereafter, the provision for loss on bad debts shall be withdrawn in full in the light of the impairment test result. —No amount due from shareholders who hold 5% or more of the voting rights of the Company is included in the balance of other receivables. 3. Long-term Equity Investment 31 Dec. 2007 31 Dec. 2008 Decrease in Items Provision for Increase in 2008 2008 Provision Amount Amount impairment for impairment Stock investment 11,850,000.00 5,850,000.00 - - 11,850,000.00 5,850,000.00 Other equity investment 124,953,715.88 187,009,875.00 1,000,000.00 310,963,590.88 3,298,904.81 - Total 136,803,715.88 5,850,000.00 187,009,875.00 1,000,000.00 322,813,590.88 9,148,904.81 —Stock investment Proportion in the Market price Nature of Number Investment Provision for Name of invested enterprise investee’s as at 31 Dec. stocks of shares amount impairment registered capital 2008 Shenzhen Zhonghao (Group) Corporate 650,000 Below 5% 5,850,000.00 - 5,850,000.00 Co., Ltd. shares Chengdu Hongbo Industrial Corporate 5,000,000 6.94% 6,000,000.00 - Co.,Ltd. shares - Total 11,850,000.00 - 5,850,000.00 —Other equity investment Proportion in Name of invested Term of the investee’s Increase/decrease Provision for 31 Dec. 2007 31 Dec. 2008 enterprise investment registered in 2008 impairment capital Guangdong Development Bank Foshan Branch 500,000.00 Below 5% - 500,000.00 - Foshan Fochen Road Development Company Limited 14,175,627.38 7.66% -1,000,000.00 13,175,627.38 - China Everbright Bank 30,828,816.00 0.29% 30,828,816.00 - Xiamen Commercial Bank 9.99% 115,009,875.00 115,009,875.00 - Guangzhou Zhujiang Asset Management Company Limited 10,000,000.00 15.38% 10,000,000.00 3,298,904.81 Shenzhen Liangke Venture 50 years Capital Company Limited 13,718,882.66 18.50% - 13,718,882.66 - Foshan Chanchang Lighting Components Co., Ltd. 3,330,389.84 40% - 3,330,389.84 - Foshan Chansheng Electronic Ballast Co., 10 years Ltd. 750,000.00 75% - 750,000.00 - Foshan Modern Lighting Co., Ltd. 4,500,000.00 90% - 4,500,000.00 - 75 Proportion in Name of invested Term of the investee’s Increase/decrease Provision for 31 Dec. 2007 31 Dec. 2008 enterprise investment registered in 2008 impairment capital Foshan Chanchang Electric Appliance (Gaoming) Co., Ltd. 42,000,000.00 70% - 42,000,000.00 - Foshan Taimei Times Lamps and Lanterns Co., Ltd. 350,000.00 70% - 350,000.00 - Foshan Gaoming Fuwan Landscape Resort Co., Ltd. 4,800,000.00 100% - 4,800,000.00 - Prosperity (Nanjing) Lighting Components Co., Ltd. 100% 72,000,000.00 72,000,000.00 - Total 124,953,715.88 186,009,875.00 310,963,590.88 3,298,904.81 4. Investment Income Items 2008 2007 Income from stock Investment 164,536,598.88 322,232,337.89 Profits distributed from affiliated or joint venture corporations 5,356,862.34 2,745,829.48 Amortized investment cost of Foshan Road Development Company Limited -1,000,000.00 -1,000,000.00 Total 168,893,461.22 323,978,167.37 —Investment income decreased by RMB 155,084,706.15 Yuan than 2007, down by 47.87%, which was due to decease of investment in securities market and significant reduction of earnings from stocks and funds invested by idle funds for the influence by securities market fluctuation. IX. Related Parties and Related Party Transactions Related Party Relationships —related parties with controlling relationships with the Company ——Related parties with controlling relationships with the Company are as follows: Relationship Organization Legal Name of enterprises Registration address Main business with the code representative Company Manufacturing bromine Joint venture tungsten-arc lamps, special Foshan Chanchang Lighting 64 Fenjiang North corporation lighting source products and 61762135-X Zhong Xincai Components Co., Ltd. Road, Foshan under actual ancillary devices, sales in home control and export sales Foshan Chansheng Electronic Manufacturing electronic ballasts, 64 Fenjiang North Ballast Co., Ltd. electronic transformers, Subsidiary 75207544-3 Zhong Xincai Road, Foshan electronic triggers. Foshan Modern Lighting Co., Research, development, Ltd. production and sales of lighting 64 Fenjiang North appliances and household Subsidiary 76571028-2 Ou Muben Road, Foshan appliances and accessories and other lighting products 76 Relationship Organization Legal Name of enterprises Registration address Main business with the code representative Company Foshan Chanchang Electric Production and operation of Appliance (Gaoming) Co., Cangjiang Industrial lamps, electric light source Ltd. Park, Gaoming products and accessories, Subsidiary 77920377-5 Zhong Xincai District, Foshan installation and related engineering consulting business. Foshan Taimei Times Lamps Research, development, and Lanterns Co., Ltd. Cangjiang Industrial production, sales of lighting, Park, Gaoming household appliances and Subsidiary 78203558-1 Ou Muben District, Foshan accessories and other lighting products. Foshan Gaoming Fuwan Side of the Hengjiang In-progress of founding (tourist Landscape Resort Co., Ltd. Reservoir, Hefu Road, industry, catering service, sauna, Hecheng Street, foot-bathing, games, retail of Subsidiary 79623406-3 Zhong Xincai Gaoming District, beverages, sports on the water, Foshan City chess) Prosperity (Nanjing) Lighting Production of energy-saving Components Co., Ltd. photoelectric source products, lamps and lanterns, light source equipments, illumination Honglan Town, Lishui Zhuang engineering; technological Subsidiary 74539880-X County, Nanjing Jianyi development of energy-saving and production of relevant components; sales of self-production products —Registered capital of related parties with controlling relationships with the Company and its change Name of enterprises 31 Dec. 2007 Increase in 2008 Decrease in 2008 31 Dec. 2008 Foshan Chanchang Lighting USD1,800,000.00 - - USD1,800,000.00 Components Co., Ltd. Foshan Chansheng Electronic Ballast RMB1,000,000.00 - - RMB1,000,000.00 Co., Ltd. Foshan Modern Lighting Co., Ltd. RMB 5,000,000.00 - - RMB 5,000,000.00 Foshan Chanchang Electric Appliance RMB60,000,000.00 - - RMB60,000,000.00 (Gaoming) Co., Ltd. Foshan Taimei Times Lamps and RMB500,000.00 - - RMB500,000.00 Lanterns Co., Ltd. Foshan Gaoming Fuwan Landscape RMB4,800,000.00 - - RMB4,800,000.00 Resort Co., Ltd. Prosperity (Nanjing) Lighting RMB49,172,063.70 - RMB7,488,863.70 RMB41,683,200.00 Components Co., Ltd. — Stock or equity held by related parties with controlling relationship the Company and its change Increase in Decrease Name of enterprises 31 Dec. 2007 Proportion 31 Dec. 2008 Proportion 2008 in 2008 Foshan Chanchang Lighting USD720,000.00 40% - - USD720,000.00 40% Components Co., Ltd. Foshan Chansheng Electronic RMB750,000.00 75% - - RMB750,000.00 75% Ballast Co., Ltd. Foshan Modern Lighting Co., RMB4,500,000.00 90% - - RMB4,500,000.00 90% Ltd. Foshan Chanchang Electric RMB42,000,000.00 70% - - RMB42,000,000.00 70% Appliance (Gaoming) Co., Ltd. Foshan Taimei Times Lamps RMB350,000.00 70% - - RMB350,000.00 70% and Lanterns Co., Ltd. 77 Foshan Gaoming Fuwan RMB4,800,000.00 100% - - RMB4,800,000.00 100% Landscape Resort Co., Ltd. Prosperity (Nanjing) Lighting RMB41,683, RMB41,683,200.00 100% Components Co., Ltd. 200.00 —Related parties without controlling relationship with the Company Name of related parties Relationship with the company Prosperity (Hangzhou) Lighting and Electrical Controlled by the Vice Chairman of the Board of the Company Co., Ltd. Hangzhou Times Lighting and Electrical Co., Ltd. Controlled by the Vice Chairman of the Board of the Company Prosperity Electrical (China) Co., Ltd. Controlled by the Vice Chairman of the Board of the Company Prosperity Lamps Components Co., Ltd. A shareholder holding over 50% equity of the Company, and controlled by the Vice Chairman of the Board of the Company Prosperity (Nanjing) Lighting Components Co., Controlled by the Vice Chairman of the Board of the Company Ltd. Prosperity (Xinxiang) Electro-Optical Machinery Controlled by the Vice Chairman of the Board of the Company Co., Ltd. Influenced on this company by the Vice Chairman of the Board of OSRAM (China) Lighting Co., Ltd. the Company The transactions between the Company and Prosperity (Nanjing) Lighting Components Co., Ltd. are related transactions before the Company completed the enterprise merger to the said company in Dec. 2008. Related Transactions —Purchase of raw materials 2008 2007 Name of enterprises Percentage of the Percentage of the Amount purchase for the Amount purchase for the current period current period Prosperity Lamps Components Co., 9,143,476.29 1.23% 8,646,114.68 1.10% Ltd. Prosperity Electrical (China) Co., 5,236,355.25 0.71% 0.33% Ltd. 2,588,743.50 Prosperity (Nanjing) Lighting 2,466,316.61 0.33% - Components Co., Ltd. - OSRAM (China) Lighting Co., Ltd. - - 21,760.10 - Hangzhou Times Lighting and - - - Electrical Co., Ltd. 9,500.00 Total 16,846,148.15 2.27% 11,266,118.20 1.43% — Sale of products 2008 2007 Name of enterprises Proportion of Proportion of Amount the sales for the Amount the sales for the current period current period Prosperity Lamps Components Co., 67,502,511.02 4.21% Ltd. 80,531,722.80 5.74% Prosperity (Hangzhou) Lighting and 9,338,578.66 0.58% Electrical Co., Ltd. 4,259,598.08 0.30% Prosperity Electrical (China) Co., Ltd. 1,674,228.63 0.10% 6,367,522.21 0.45% OSRAM (China) Lighting Co., Ltd. 46,971,221.54 2.93% 60,025,684.97 4.27% Total 125,486,539.86 7.82% 151,184,528.06 10.76% — Sale of materials Name of enterprises 2008 2007 78 Proportion of Proportion of Amount the sales for the Amount the sales for the current period current period OSRAM (China) Lighting Co., Ltd. 68,792.35 0.07% 141,650.94 0.18% Prosperity (Hangzhou) Lighting and 0.51% Electrical Co., Ltd. 502,054.39 532,999.45 0.69% Total 570,846.74 0.58% 674,650.39 0.87% — Sales of fixed assets In 2008, the Company sold original value of RMB 398,499.70 and accumulative depreciation of RMB 280,925.63 worth of fixed assets to Prosperity (Xinxiang) Electro-Optical Machinery Co., Ltd. —Purchase of fixed assets 2008 2007 Proportion of Proportion of Name of enterprises the purchase the purchase of Amount of fixed assets Amount fixed assets for for the current the current period period Prosperity (Xinxiang) Electro-Optical 1,220,868.00 2.90% 752,000.00 0.70% Machinery Co., Ltd. Prosperity Lamps Components Co., Ltd. 1,392,611.13 2.54% - - Total 2,613,479.13 5.44% 752,000.00 0.70% —Purchase of land use right —As by approved by the Board of Directors, the Company purchased the land use right located in Xiaodian Industrial Zone of Xinxiang City from Prosperity (Xinxiang) Electro-Optical Machinery Co., Ltd. in 2008. The transaction price shall, in accordance with the appraisal price in the Appraisal Report with “LXPB Zi {2008} No. Z0522 document” issued by Guangdong Lianxin Asset Appraisal Land and Property Valuation Co., Ltd., be determined as RMB 25 million. —Purchase of equity —As by approved by the Board of Directors, the Company signed the Shares Transfer Agreement with Prosperity Lamps Components Co., Ltd. on 27 Aug. 2008, in which the Company acquired 100% equity of Prosperity (Nanjing) Lighting Components Co., Ltd. held by Prosperity Lamps Components Co., Ltd.. The transaction price shall, in accordance with the appraisal price in the Appraisal Report with “LXPB Zi {2008} No. A0523 document” issued by Guangdong Lianxin Asset Appraisal Land and Property Valuation Co., Ltd., be determined as RMB 72 million. —Commission paid for agent for import equipment 2008 2007 Name of enterprises Proportion in payment Proportion in payment Amount Amount for relevant equipment for relevant equipment Prosperity Lamps Components Co., Ltd. 857,535.88 3% —Payment of sales commissions The company signed the product sales commission agreement with Prosperity Lamps Components Co., Ltd. and its supplementary agreement. According to the general practice of international market trade, the company pays product sales commission to Prosperity Lamps Components Co., Ltd. according to a certain percentage (between 5% and 10%) of the actual amount of goods purchased from the company. Sales commissions are paid RMB 4,914,491.53 and RMB 2,445,755.26 respectively in 2007 and 2008. 79 —Balance of receivables and payables of related parties Related parties 31 Dec. 2008 31 Dec. 2007 Accounts receivable Prosperity (Hangzhou) Lighting and Electrical Co., Ltd. 4,607,179.14 1,375,132.19 Prosperity Electrical (China) Co., Ltd. 1,927,019.92 1,884,857.22 OSRAM (China) Lighting Co., Ltd. 4,055,123.41 20,858,688.83 Prosperity Lamps Components Co., Ltd. 7,603,340.59 28,353,338.14 Accounts payable Prosperity Lamps Components Co., Ltd. 229,562.82 2,305,908.70 Prosperity Electrical (China) Co., Ltd. 119,656.00 Prepayments Prosperity (Xinxiang) Electro-Optical Machinery Co., Ltd. 173,900.57 233,840.00 Other payables Prosperity (Xinxiang) Electro-Optical Machinery Co., Ltd. 5,000,000.00 - Prosperity Lamps Components Co., Ltd. 12,174,789.08 - X. Important Contracts and Matters Equity incentive funds In accordance with the resolution of the Annual Shareholders’ General Meeting 2001 held on 16 May 2002, the proposal on establishing equity incentive mechanism for middle and senior management personnel. Such proposal specifies 6% of annual return on net assets as performance appraisal indicator. When the annual return on net assets reaches to 6%, the equity incentive fund shall be withdrawn in the light of 5% of net profit, withdrawal percentage of incentive funds will be increased simultaneously with the growth proportion of return on net assets. The said resolution shall be implemented from the fiscal year of 2001. Combining component of profit, the equity incentive funds of RMB 7 million is withdrawn for the year 2008. XI. Contingent events As at 31 Dec. 2008, the Company has no contingent events that need to be disclosed. XII. Commitments In accordance to the equipment purchase and construction contracts signed by the Company, the Company shall RMB 50,885,900 Yuan for relevant items in 2009. XIII. Events after Balance Sheet Date Event on purchasing trademark “QL” — As approved by the Board of Directors, the Company signed the Trademark Transfer Agreement with Foshan Chanchang Lighting Components Co., Ltd. on 15 Jan. 2009, in which the trademark “QL” held by Foshan Chanchang Lighting Components Co., Ltd. is transferred to the Company. The transaction price shall, in accordance with the appraisal price in the Appraisal Report with “ZKHPB Zi {2008} No. P014 document” issued by Beijing Zhong Ke Hua Asset Appraisal Co., Ltd., be determined as RMB 12 million. Liquidation of subsidiary company In Jan. 2009, the Board of Directors of the Company passed a resolution, which it intends to make liquidation to Foshan Modern Lighting Co., Ltd.. 80 Preplan on transferring capital reserve to stocks and profit distribution In accordance with the preplan on transferring capital reserve to stocks and profit distribution for the year 2008 approved by the resolutions of the Board of Directors on 7 Apr. 2009, appropriating 10% of net profit after tax (RMB 227,097,272.30) of parent company as discretionary surplus reserve amounting to RMB22,709,727.23, thereafter, based on total share capital of 698,974,104 shares as at 31 Dec. 2008, the Company shall transfer capital reserve to stocks at the rate of 4 for 10 and distribute cash dividends of RMB 2.20 (tax included) for every 10 shares to all shareholders, totaling 279,589,641 shares and RMB 153,774,302.88 in cash. The above-motioned plan distribution draft shall be implemented under approval by the Shareholders’ General Meeting. X I V. S u p p l e m e n t a r y I n f o r m a t i o n 1. Non-recurring gains and losses The company collects and calculates non-recurring profit and loss items of the consolidated financial statement according to relevant regulations of the Answers & Questions on Regulations on Information Disclosure by Companies That Offer Securities to the Public of the China Securities Regulatory Commission No.1 –Non-recurring Profit and Loss (2008). Items 2008 2007 Gains and losses on the disposal of non-current assets, including -1,500,075.69 -1,522,501.82 offset provision for assets impairment withdrawn Government subsidies recorded into current profit and loss (excluding government subsidies with close relationship with the 2,116,871.00 - Company’s business and rationed government grants in line with the united standard) Gains and losses on change in fair value from tradable financial assets and tradable financial liabilities, as well as investment income 110,418,926.17 349,302,379.82 from disposal of tradable financial assets and tradable financial liabilities and financial assets available for sales except for effective hedging related with normal businesses of the Company Capital occupied from non-financial enterprise recorded into current 3,100,100.49 1,326,300.07 profit and loss Income from the difference that investment cost obtained from subsidiaries, affiliated enterprises and joint enterprises is lower 1,122,047.92 - than fair value of net identifiable assets of invested enterprises which the Company should enjoy when investment Net amount of other non-operating incomes and expenses except 1,103,079.50 7,698,176.45 the above items Subtotal 116,360,949.39 356,804,354.52 Less: Enterprise income tax (decreases expressed with “-”) 17,737,718.98 53,520,653.18 Minority shareholder’s gains and losses -249,909.19 2,305,472.64 Net amount of non-recurring profit and loss belonging to common 98,873,139.60 300,978,228.70 shareholders of the company 2. Return on Equity and Earnings per Share of Consolidated Financial Statements The company calculates the return on equity and earnings per share of consolidated financial statements within the report period according to the requirements of the Rules for the Compilation of Information Disclosures by the Companies That Offer Securities to the Public No.9-Computation and Disclosure of Return on Equity (revised in 2007) complied by the China Securities Regulatory Commission. Return on equity (％) Earnings per share (Yuan) Items Fully diluted Weighted average EPS-basic EPS-diluted Net profit attributable to 8.62 7.62 0.32 0.32 2008 common shareholders of the Company 81 Net profit attributable to 4.82 4.26 0.18 0.18 common shareholders of the Company after deduction of non-recurring profit and loss Net profit attributable to 14.19 16.86 0.61 0.61 common shareholders of the Company 2007 Net profit attributable to 4.11 4.89 0.18 0.18 common shareholders of the Company after deduction of non-recurring profit and loss Formulas for computing various indexes are as follows: (1) Fully diluted return on equity =P÷E Of which: P is the net profit belonging to common stockholders of the company or the net profit belonging to common stockholders of the company after deduction of non-recurring profit and loss；E is the closing net assets belonging to common stockholders of the company. (2) Weighted average yield of net assets =P/(E0＋NP÷2＋Ei×Mi÷M0－Ej×Mj÷M0±Ek×Mk÷M0) Of which: P is the net profit belonging to common stockholders of the company or net profit belonging to common stockholders of the company after deduction of non-recurring profit and loss；NP is the net profit belonging to common stockholders of the company; E0 is the opening net assets belonging to common shareholders of the company; Ei is the net assets newly added due to issuance of new shares or debt-to-equity swap during the report period and belonging to common shareholders of the company; Ej is the net assets decreased due to counter-purchase or cash bonus and belonging to common shareholders of the company; M0 is the number of months of the report period; Mi is the number of months from the month following the increase of net assets to the end of the report period; Mj is the number of months from the month following the decrease of net assets to the end of the report period; Ek is the change in net assets caused by other transactions or events; Mk is the number of months from the month following the change of net assets to the end of the report period. (3)Basic earnings per share=P÷S S= S0＋S1＋Si×Mi÷M0－Sj×Mj÷M0－Sk Of which: P is the net profit belonging to common stockholders of the company or net profit belonging to common stockholders of the company after deduction of non-recurring profit and loss; S is the weighted mean of the outstanding stock; S0 is the sum of shares at the beginning of the period; S1 is the number of shares increased due to conversion of accumulation funds to capital stock or distribution of stock dividends during the report period; Si is the number of shares increased due to issuance of new shares or debt-to-equity swap during the report period; Sj is the number of shares decreased due to counter-purchase during the report period; Sk is the number of shares reduced within the report period; M0 is the number of months of the report period; Mi is the number of months from the month following the increase of net assets to the end of the report period; Mj is the number of months from the month following the decrease of net assets to the end of the report period. (4)Diluted earnings per share=[P+(Diluted potential common stock dividends confirmed as expenses －conversion charge)×(1-income tax rate)]/(S0＋S1＋Si×Mi÷M0－Sj×Mj÷M0—Sk+ weighted mean of common stock increased by subscription warrants, stock options and convertible bonds ) Of which: P is the net profit belonging to common stockholders of the company or the net profit belonging to common stockholders of the company after deduction of non-recurring profit and loss. The Company has no diluted potential ordinary share. 3. Provision for Impairment of Assets Increase in Decrease in 2008 Items 31 Dec. 2007 31 Dec. 2008 2008 Switching Other 82 back Provision for bad debts 16,290,454.97 2,681,722.49 - - 18,972,177.46 Provision for falling price of inventory - 165,352.58 - - 165,352.58 Provision for impairment of long-term 3,298,904.81 5,850,000.00 - - 9,148,904.81 investment Provision for impairment of fixed assets 2,043,648.78 - - - 2,043,648.78 Provision for impairment of construction - - - - - in progress Provision for impairment of intangible - - - - - assets Total 24,184,103.75 5,980,627.30 - - 30,164,731.05 XI. Documents Available for Reference Investors and relevant departments can refer to the following materials at the board secretariat of the office building of the Company: 1. Accounting statements bearing the signature and seal of the legal representative, person in charge of accounting and person in charge of the accounting organ. 2. Original copies of auditors’ report bearing the seal of the accounting firm and the signature and seal of certified public accountants. 3. Original copies of all the documents of the Company and original manuscripts of pronouncements disclosed publicly in newspapers specified by the China Securities Regulatory Commission within the reporting period. 4. Original copy of the 2008 report bearing the autograph of the chairman of the Board. Board of Directors of Foshan Electrical and Lighting Co., Ltd. 7 Apr. 2009 83 Balance Sheet Prepared by Foshan Electrical and Lighting Co., Ltd. 31 Dec. 2008 Unit: RMB Yuan Closing balance Beginning balance Items Consolidation Parent company Consolidation Parent company Current assets: Monetary funds 927,868,735.28 886,298,530.33 1,098,078,385.11 1,062,083,375.17 Settlement fund reserve Dismantle fund Transaction financial asset 107,217,672.71 107,217,672.71 Notes receivable 38,410,882.00 37,950,500.00 34,960,577.14 34,294,577.14 Account receivable 217,936,592.58 234,306,060.48 213,517,871.04 208,688,722.86 Account paid in advance 49,513,913.85 45,534,243.85 13,020,791.71 11,790,143.02 Premium receivables Receivables from reinsurers Reinsurance contract reserve receivables Interest receivable Dividend receivable 1,376,373.53 Other account receivable 46,055,805.64 53,938,618.08 42,156,366.86 73,374,777.51 Financial assets purchased under agreements to resell Inventories 289,488,562.20 275,737,997.20 283,361,896.36 255,738,274.14 Non-current assets due within 1 year Other current assets Total current assets 1,569,274,491.55 1,535,142,323.47 1,792,313,560.93 1,753,187,542.55 Non-current assets: Loans and advance Available for sale financial assets 511,206,158.54 511,206,158.54 Held to maturity investments Long-term account receivable Long-term equity investment 185,934,296.23 313,664,686.07 75,223,326.04 130,953,715.88 Investing property Fixed asset 739,153,801.16 650,536,282.48 776,411,743.09 714,640,187.56 Project in construction 126,808,534.41 116,670,796.50 93,303,507.82 87,331,604.75 Engineering material Fixed asset disposal Bearer biological asset Oil assets Intangible assets 191,500,392.72 161,838,003.50 144,044,939.45 139,055,092.26 Development expense Goodwill Long-term expense to be 238,067.40 169,127.42 482,531.40 353,591.42 apportioned Deferred tax assets 17,359,253.59 17,274,045.17 Other non-current assets Total of non-current assets 1,260,994,345.51 1,260,152,941.14 1,600,672,206.34 1,583,540,350.41 Total assets 2,830,268,837.06 2,795,295,264.61 3,392,985,767.27 3,336,727,892.96 Current liabilities: Short-term borrowings Borrowing from Central Bank Deposits and due to banks and other financial institutions Placements from banks and other financial institutions Transaction financial liabilities Notes payable Account payable 109,342,560.80 116,090,609.10 124,861,341.59 110,434,047.28 Account received in advance 16,065,789.02 15,246,368.29 9,085,272.37 6,148,992.46 Financial assets sold under agreements to repurchase Handling charges and commission payable 84 Employee’s compensation 37,637,138.30 36,870,520.50 80,464,898.71 76,873,567.03 payable Tax payable -10,628,634.03 -10,688,266.86 32,622,564.14 33,824,980.32 Interest payable dividend payable 1,521,857.82 Other account payable 43,159,960.81 42,649,059.53 25,220,137.55 29,899,366.38 Due to reinsurers Insurance contract reserve Customer deposits Amount payables under security underwriting Non-current liabilities due within 1 year Other current liabilities Total current liabilities 197,098,672.72 200,168,290.56 272,254,214.36 257,180,953.47 Non-current liabilities: Long-term borrowings Debentures payable Long-term payables Specific purpose account payables 450,000.00 450,000.00 450,000.00 450,000.00 Provisions for contingent liabilities Deferred tax liabilities 101,817,363.93 101,848,619.78 Other non-current liabilities Total non-current liabilities 450,000.00 450,000.00 102,267,363.93 102,298,619.78 Total liabilities 197,548,672.72 200,618,290.56 374,521,578.29 359,479,573.25 Owner’s equity (or shareholders’ equity) Paid-in capital (or share capital) 698,974,104.00 698,974,104.00 465,982,737.00 465,982,737.00 Capital surplus 866,565,595.53 866,561,081.10 1,436,625,679.93 1,436,621,165.50 Less: Treasury Stock Reserved fund 508,327,328.02 508,327,328.02 508,327,328.02 508,327,328.02 General risk provision Retained earnings 527,878,059.71 520,814,460.93 576,317,365.16 566,317,089.19 Foreign exchange difference Total owners' equity attributable 2,601,745,087.26 2,594,676,974.05 2,987,253,110.11 2,977,248,319.71 to holding company Minority interest 30,975,077.08 31,211,078.87 Total owner’s equity 2,632,720,164.34 2,594,676,974.05 3,018,464,188.98 2,977,248,319.71 Total liabilities and owner’s 2,830,268,837.06 2,795,295,264.61 3,392,985,767.27 3,336,727,892.96 equity Person in charge of the company: Zhong Xincai Person in charge of accounting: Zhong Xincai Person in charge of the accounting organ: Wang Shuqiong 85 Income Statement Prepared by Foshan Electrical and Lighting Co., Ltd. Jan.-Dec.2008 Unit: RMB Yuan 2008 2007 Items Consolidation Parent company Consolidation Parent company 1,718,712,832.0 I. Total sales 1,736,480,410.33 1,496,072,679.54 1,505,611,725.80 7 1,718,712,832.0 Including: Sales 1,736,480,410.33 1,496,072,679.54 1,505,611,725.80 7 Interests income Premium income Handling charges and commission income 1,557,932,571.4 II. Total cost of sales 1,578,123,920.97 1,350,949,759.34 1,367,876,034.75 6 1,373,108,068.6 Including: Cost of sales 1,413,701,665.27 1,189,529,053.61 1,226,832,190.64 7 Interests expenses Handling charges and commission expenses Claim expenses-net Provision for insurance liability reserve Expenses for reinsurance accepted Payments on surrenders Policyholder dividends Taxes and associate charges 12,397,085.38 11,419,350.96 10,233,228.78 9,113,048.12 Selling and distribution expenses 59,157,149.55 51,175,279.72 57,230,907.87 47,508,332.10 Administrative expenses 112,170,084.99 100,524,045.24 83,609,557.38 73,985,537.59 Financial expense -4,880,444.43 -4,646,481.48 3,133,289.16 3,530,172.97 Impairment loss 5,980,627.30 5,950,061.26 7,213,722.54 6,906,753.33 Add: gain/(loss) from change in fair value -54,117,672.71 -54,117,672.71 20,753,385.38 21,803,609.23 (“-” means loss) Gain/(loss) from investment (“-” means 165,036,598.88 168,893,461.22 329,548,994.44 323,978,167.37 loss) Including: income form investment on affiliated enterprise and jointly enterprise Foreign exchange difference (“-” means loss) III. Business profit (“-” means loss) 271,699,186.78 273,132,277.87 495,425,300.02 483,517,467.65 Add: non-business income 6,289,629.45 4,938,095.23 8,344,086.74 8,339,260.24 Less: non-business expense 3,447,706.72 2,653,438.27 2,278,920.94 2,270,439.41 Including: loss from non-current asset 3,441,060.19 2,649,757.17 1,730,609.67 1,728,434.67 disposal IV. Total profit (“-” means loss) 274,541,109.51 275,416,934.83 501,490,465.82 489,586,288.48 Less: Tax expense 49,094,658.37 48,319,662.53 72,514,612.26 70,772,200.63 V. Net profit (“-” means loss) 225,446,451.14 227,097,272.30 428,975,853.56 418,814,087.85 -Attributable to parent company 224,160,595.11 227,097,272.30 423,797,425.54 418,814,087.85 -Minority interest 1,285,856.03 5,178,428.02 VI. Earnings per share (I) basic earnings per share 0.32 0.32 0.61 0.60 (II) diluted earnings per share 0.32 0.32 0.61 0.60 Person in charge of the company: Zhong Xincai Person in charge of accounting: Zhong Xincai Person in charge of the accounting organ: Wang Shuqiong 86 Cash Flow Statement Prepared by Foshan Electrical and Lighting Co., Ltd. Jan.-Dec. 2008 Unit: RMB Yuan 2008 2007 Items Consolidation Parent company Consolidation Parent company 1. Cash flows for operating activities: Cash received from sales of goods 1,804,804,874.46 1,803,358,280.82 1,538,837,092.40 1,493,995,993.30 or rending of services Cash received on deposits and from banks and other financial institutions Net increased cash received on borrowings from central bank Cash received on placements from other financial institutions Premium received Cash received from reinsurance Net increased amount received on policyholder deposit and investment Cash received from disposal of held for trading financial assets Interests, handling charges and commission received Cash received on placements from bank, net Cash received under repurchasing, net Refund of tax and fare received 12,332,399.20 12,332,399.20 11,817,937.03 11,814,866.35 Other cash received relating to 21,921,018.63 25,900,922.41 14,442,812.09 16,365,074.41 operating activities Sub-total of cash inflows 1,839,058,292.29 1,841,591,602.43 1,565,097,841.52 1,522,175,934.06 Cash paid for goods and services 1,199,782,541.61 1,253,058,336.31 1,094,499,914.94 1,036,018,893.68 Loans and advances drawn Cash paid to central bank, banks and other financial institutions, net Claims paid Interests, handling charges and commission paid Dividends paid to policyholders Cash paid to and on behalf of 277,013,815.07 247,202,454.22 209,722,922.07 193,733,416.65 employees Tax and fare paid 169,797,981.24 155,608,964.82 142,212,820.34 125,073,219.46 Other cash paid relating to 66,301,388.96 70,541,747.77 66,937,665.46 82,608,016.02 operating activities Sub-total of cash outflows 1,712,895,726.88 1,726,411,503.12 1,513,373,322.81 1,437,433,545.81 Net cash flow from operating 126,162,565.41 115,180,099.31 51,724,518.71 84,742,388.25 activities 2. Cash Flows from Investment Activities: Cash received from return of 525,358,023.28 525,358,023.28 1,037,223,024.36 1,034,443,555.59 investments Cash received from investment 226,585,003.57 229,065,492.38 330,548,994.44 324,978,167.37 income Net cash received from disposal of fixed assets, intangible assets 5,310,000.00 5,310,000.00 -19,000.00 and other long-term assets Proceeds from sale of subsidiaries and other operating units Other cash received relating to 7,572,468.07 investment activities Sub-total of cash inflows 764,825,494.92 759,733,515.66 1,367,772,018.80 1,359,402,722.96 Cash paid for acquiring fixed 134,979,591.11 124,503,029.50 139,571,596.17 131,981,422.29 87 assets, intangible assets and other long-term assets Cash paid for acquiring 650,450,311.89 650,450,311.89 987,423,583.49 987,423,583.49 investments Net cash used in loans Net cash used in acquiring subsidiaries and other operating units Other cash paid relating to 693,989.07 investment activities Sub-total of cash outflows 785,429,903.00 774,953,341.39 1,127,689,168.73 1,119,405,005.78 Net cash flow from investing -20,604,408.08 -15,219,825.73 240,082,850.07 239,997,717.18 activities 3. Cash Flows from Financing Activities: Cash received from absorbing investment Including: Cash received from increase in minority interest Cash received from borrowings Cash received from issuing debentures Other proceeds relating to financing activities Sub-total of cash inflows Cash paid for settling debt Cash paid for distribution of dividends or profit or reimbursing 273,226,518.78 273,226,518.78 171,924,909.98 171,676,300.15 interest Including: dividends or profit paid 248,609.83 to minority interest Other cash payments relating to financing activities Sub-total of cash outflows 273,226,518.78 273,226,518.78 171,924,909.98 171,676,300.15 Net cash flow from financing -273,226,518.78 -273,226,518.78 -171,924,909.98 -171,676,300.15 activities 4. Effect of foreign exchange rate -2,541,288.38 -2,518,599.64 -8,720,438.48 -8,693,821.01 changes 5. Increase in cash and cash -170,209,649.83 -175,784,844.84 111,162,020.32 144,369,984.27 equivalents Add : Cash and cash equivalents 1,098,078,385.11 1,062,083,375.17 986,916,364.79 917,713,390.90 at year-begin 6. Cash and cash equivalents at 927,868,735.28 886,298,530.33 1,098,078,385.11 1,062,083,375.17 the end of the year Person in charge of the company: Zhong Xincai Person in charge of accounting: Zhong Xincai Person in charge of the accounting organ: Wang Shuqiong 88 Supporting Statement to the Cash Flow Statement Prepared by Foshan Electrical and Lighting Co., Ltd. Jan.-Dec. 2008 Unit: RMB Yuan Supplementary information 2008 2007 1. Adjusting net profit into cash flows of operating activities: Net profit 225,446,451.14 428,975,853.56 Add: Provision for impairment of assets 5,980,627.30 7,213,722.54 Depreciation of fixed assets 136,949,186.21 131,994,347.74 Amortization of intangible assets 3,665,926.03 2,851,437.90 Amortization of long-term expenses to be apportioned 244,464.00 837,350.14 Loss from disposal of fixed assets, intangible assets and 1,500,075.69 1,522,501.82 other long-term assets (income is listed with “-”) Loss from change in fair value 54,117,672.71 -20,753,385.38 Financial expenses 2,541,288.38 8,720,438.48 Investment loss (income is listed with “-”) -165,036,598.88 -329,548,994.44 Deferred income tax assets – credit item (less: debt item) -6,735,169.96 -4,424,301.24 Decrease of inventory (increase is listed with “-”) -617,237.28 -60,966,076.30 Decrease in operating receivables（increase is listed -6,466,622.42 -128,956,155.96 with “-”) Increase in operating payables（decrease is listed with -125,427,497.51 14,257,779.85 “-”) Net cash flows arising from operating activities 126,162,565.41 51,724,518.71 2. Net increase (decrease) in cash and cash equivalents: Ending balance of cash 927,868,735.28 1,098,078,385.11 Less: Beginning balance of cash 1,098,078,385.11 986,916,364.79 Add: ending balance of cash equivalents - Less: beginning balance of cash equivalents - Net increase in cash and cash equivalents -170,209,649.83 111,162,020.32 Person in charge of the company: Zhong Xincai Person in charge of accounting: Zhong Xincai Person in charge of the accounting organ: Wang Shuqiong 89 Statement of Change in Owners’ Equity Prepared by Foshan Electrical and Lighting Co., Ltd. 31 Dec. 2008 Un 2008 200 Owners’ equity attributable to parent company Owners’ equity attributable to parent com G Items Paid-up capital Lessen: General Total of owners’ Lessen: Surplus public Minority equity Paid-up capital Capital reserve treasury Surplus public (or share Capital reserve treasur risk Retained profits Others equity reserve (or share capital) reserve capital) y stock reserve stock r I. balance at the end of last 465,982,737.00 1,436,625,679.93 508,327,328.02 576,317,365.16 31,211,078.87 3,018,464,188.98 358,448,259.00 1,207,091,440.53 487,386,623.63 year Add: Change of accounting policy Correction of errors in previous period Other II. balance at the beginning 465,982,737.00 1,436,625,679.93 508,327,328.02 576,317,365.16 31,211,078.87 3,018,464,188.98 358,448,259.00 1,207,091,440.53 487,386,623.63 of this year III. Increase/ decrease of amount in this year (“-” 232,991,367.00 -570,060,084.40 -48,439,305.45 -236,001.79 -385,744,024.64 107,534,478.00 229,534,239.40 20,940,704.39 means decrease) (I) Net profit 224,160,595.11 1,285,856.03 225,446,451.14 (II)Gain/loss listed to -337,068,717.40 -337,068,717.40 337,068,717.40 owners’ equity directly 1. Net amount on changes in book value of financial -449,424,956.54 -449,424,956.54 449,424,956.54 assets available for sale 2. Effect on changes in other owners’ equity of invested units under equity method 3. Effect on income tax related to items listed to 112,356,239.14 112,356,239.14 -112,356,239.14 owners’ equity 4. Others Subtotal of (I)and (II) -337,068,717.40 224,160,595.11 1,285,856.03 -111,622,266.26 337,068,717.40 (III) Input an reduced capital of owners 1. Input capital of owners 2. Amount of Shares included in the owners’ equity 3. Others (IV) Profit distribution -272,599,900.56 -1,521,857.82 -274,121,758.38 0.00 0.00 20,940,704.39 1. Withdrawing surplus 20,940,704.39 90 public reserve 2. Withdrawing general risk -272,599,900.56 -1,521,857.82 -274,121,758.38 reserve 3. Distribution to all owners (shareholders) 4. Other 0.00 0.00 (V)Internal carrying forward 232,991,367.00 -232,991,367.00 107,534,478.00 -107,534,478.00 of owners’ equity 1. New increase of capital (share capital) from capital 232,991,367.00 -232,991,367.00 107,534,478.00 -107,534,478.00 reserves 2. Convert surplus reserves to capital(share capital) 3. Surplus reserves make up losses 4. Others IV. Balance at the end of this 698,974,104.00 866,565,595.53 508,327,328.02 527,878,059.71 30,975,077.08 2,632,720,164.34 465,982,737.00 1,436,625,679.93 508,327,328.02 period Person in charge of the company: Zhong Xincai Person in charge of accounting: Zhong Xincai Person in charge of the accounting organ: Wang Shuqiong Statement of Change in Owners’ Equity Prepared by Foshan Electrical and Lighting Co. Ltd 31 Dec. 2008 2008 2007 Items Paid-up capital Paid-up capital Surplus public Surplus public (or share Capital reserve Retained profits Total of owners’ equity (or share Capital reserve Retained pro reserve reserve capital) capital) I. balance at the end of last year 465,982,737.00 1,436,621,165.50 508,327,328.02 566,317,089.19 2,977,248,319.71 358,448,259.00 1,207,086,926.10 487,386,623.63 347,667,835 Add: Change of accounting policy Correction of errors in previous period Other II. balance at the beginning of this year 465,982,737.00 1,436,621,165.50 508,327,328.02 566,317,089.19 2,977,248,319.71 358,448,259.00 1,207,086,926.10 487,386,623.63 347,667,835 91 III. Increase/ decrease of amount in this year (“-” means decrease) 232,991,367.00 -570,060,084.40 0 -45,502,628.26 -382,571,345.66 107,534,478.00 229,534,239.40 20,940,704.39 218,649,253 (I) Net profit 0 0 0 227,097,272.30 227,097,272.30 0 0 0 418,814,087 (II)Gain/loss listed to owners’ equity directly 0 -337,068,717.40 0 0 -337,068,717.40 0 337,068,717.40 0 1. Net amount on changes in book value of financial assets 0 -449,424,956.54 0 0 -449,424,956.54 0 449,424,956.54 0 available for sale 2. Effect on changes in other owners’ equity of invested units under equity method 3. Effect on income tax related to items listed to 0 112,356,239.14 0 0 112,356,239.14 0 -112,356,239.14 0 owners’ equity 4. Others Subtotal of (I)and (II) 0 -337,068,717.40 0 227,097,272.30 -109,971,445.10 0 337,068,717.40 0 418,814,087 (III) Input an reduced capital of owners 1. Input capital of owners 2. Amount of Shares included in the owners’ equity 3. Others (IV) Profit distribution 0 0 0 -272,599,900.56 -272,599,900.56 0 0 20,940,704.39 -200,164,833 1. Withdrawing surplus public reserve 0 0 0 0 0 0 0 20,940,704.39 -20,940,704 2. Withdrawing general 0 0 0 -272,599,900.56 -272,599,900.56 0 0 0 -179,224,129 risk reserve 92 3. Distribution to all owners (shareholders) 4. Other (V)Internal carrying forward of owners’ 232,991,367.00 -232,991,367.00 0 0 0 107,534,478.00 -107,534,478.00 0 equity 1. New increase of capital (share capital) from capital reserves 232,991,367.00 -232,991,367.00 0 0 0 107,534,478.00 -107,534,478.00 0 2. Convert surplus reserves to capital(share capital) 3. Surplus reserves make up losses 4. Others IV. Balance at the end of this period 698,974,104.00 866,561,081.10 508,327,328.02 520,814,460.93 2,594,676,974.05 465,982,737.00 1,436,621,165.50 508,327,328.02 566,317,089 Person in charge of the company: Zhong Xincai Person in charge of accounting: Zhong Xincai Person in charge of the accounting organ: Wang Shuqiong 93 Statement to the Provision for Assets Impairment (Consolidated Accounting Statement) Prepared by Foshan Electrical and Lighting Co., Ltd. 31 Dec. 2008 Unit: RMB Yuan Increase in 2008 Decrease in 2008 Opening Closing Items amount Other Withdrawal Switching Other decrease amount increase back Provision for bad debts 16,290,454.97 - 2,681,722.49 - - 18,972,177.46 Provision for falling - 165,352.58 - - - 165,352.58 price of inventory Provision for impairment of 5,850,000.00 - 3,298,904.81 - - 9,148,904.81 long-term investment Provision for impairment of fixed 2,043,648.78 - - - - 2,043,648.78 assets Provision for impairment of - - - - - - construction in progress Provision for impairment of - - - - - - intangible assets Total 24,184,103.75 165,352.58 5,980,627.30 - - 30,164,731.05 Person in charge of the company: Zhong Xincai Person in charge of accounting: Zhong Xincai Person in charge of the accounting organ: Wang Shuqiong 94