宝石Ｂ(200413)2008年年度报告（英文版）

石家庄宝石电子玻璃股份有限公司 SHIJIAZHUANG BAOSHI ELECTRONIC GLASS COMPANY LIMITED Annual Report 2008 （Full text） Stock code: 000413, 200413 Stock abbreviation: Baoshi A, Baoshi B Date of disclosure:：March 28, 2009 Important Notes The Board of Directors of the Company hereby guarantees that there are no misstatement, misleading representation or important omissions in this report and shall assume joint and several liability for the authenticity, accuracy and completeness of the contents hereof. Zhong Xi Certified Public Accountants audited the financial report of the Company for this report period and issued standard unqualified auditor's report. Board Chairman Mr. Shang Jianbin, Chief Accountant Mr. Song Hongbo, and the Chief of accountant department Mr.Zhou Yumao represent and warrant the financial report in this annual report is true and complete. Table of Contents Chapter 1 Brief Introduction of the Company Chapter 2 Highlights of Accounting Data and Business Data Chapter 3 Particulars about the Changes of Share Capital and Shareholders Chapter 4 Directors, Supervisors, Senior Executives and Staff Chapter 5 Control Structure of the Company Chapter 6 Brief Introduction of Shareholders’ General Meeting Chapter 7 Report of the Board of Directors Chapter 8 Repot of the Supervisory Committee Chapter 9 Important Events Chapter 10 Financial Reports Chapter 11 List of Documents Available for Inspection 1 Chapter 1 Brief Introduction of the Company (I) Statutory name of the Company In Chinese :石家庄宝石电子玻璃股份有限公司 In English : Shijiazhuang Baoshi Electronic Glass Co., Ltd. Abbreviation of English name: SJZBS (II) Legal Representative: Shang Jianbin (III) Secretary of the Board of Directors: Fu Yinfang Securities affair representative: Wang Hua Contact address: No.9, Huanghe Road, Shijiazhuang High-tech Industrial Development Area, Shijiazhuang, Hebei Province (Law Securities Dept.) Tel:0311-86917771，86917776 Fax:0311-86917775 E-mail:bsdz@heinfo.net (IV) Registered Address: No.9, Huanghe Road, Shijiazhuang High-tech Industrial Development Area, Shijiazhuang, Hebei Province Office Address: No.9, Huanghe Road, Shijiazhuang High-tech Industrial Development Area, Shijiazhuang, Hebei Province Zip Code: 050035 E-mail: bs@bseg.cn (V) Newspapers for Information Disclosure: China Securities Daily, Hong Kong Commercial Daily Website Designated by CSRC for Publishing the Annual Report: http://www.cninfo.com.cn The place for preparing and placing the annual report: Law Securities Dept. of the Company (VI). Stock exchange for listing: Shenzhen Stock Exchange Stock abbreviation: Baoshi A, Baoshi B Stock code: 000413, 200413 (VII) Other Relevant Information The date when and the place where the Company made its first registration: December 26, 1992 Shijiazhuang City 2. Registration No. of Legal Entity Business License: 130000000001040 3. Tax Registration No.: 130111104395983 4. Organization Code：10439598-3 5.The name and office address of the Certified Public Accountants engaged by the Company: Domestic Certified Public Accountants: Zhongxi Certified Public Accountants Co., Ltd. Address: Room 422, Capital Time Piaza, No.88. Changan Street West, Beijing. Chapter 2 Highlights of Accounting Data and Business Data (I) Main profit indicators of the report year (consolidated financial statement) Items Amount（RMB） Operation profit 5,177,053.38 Total profit 5,121,428.28 Net profit attributable to shareholders of the listed company 4,139,364.817 Net profit after deducting of non-recurring gain/lossattributable to the shareholders of the listed 3,283,914.88 2 company Cash flow generated by business operation , net 3,428,116.94 Deducted nonrecurring gain or loss items and related amount： Items Amount（RMB） Non-recurring gain and loss items -90,325.10 Governmental Subsidy accounted as current gain/loss 35,000.00 Switch back of provision for devaluation of account 1,000,000.00 receivable Other non-operating expenses -300.00 Other non-operating income and expenditure beside for the 112,758.34 above items Amount of influence of income tax -14,283.31 Influence on minority interests -187,400.00 Amount of influence of Net profit 855,449.93 (II)The net profit calculated pursuant to Chinese accounting standards and International Accounting Standards (IAS) and the notes to the net profit difference. (Unaudited) Unit：RMB Domestic accounting standard Overseas accounting standard Net profit 4,139,364.81 4,139,364.81 Net assets 249,362,995.21 249,362,995.21 Statement about There was no difference in this report period. the diversity (III) Main Accounting Data and Financial Indicators over the Past Three Years as at the End of the Report Period 1.Main accoubnting date Unit：RMB Changed over Year 2008 Year 2007 Year 2006 last year（％） Operating profit 205,224,991.42 228,141,181.38 -10.04% 231,608,310.31 Total profit 5,121,428.28 18,466,341.64 -72.27% -76,058,769.49 Net profit attributable to the shareholders of 4,139, 364.81 10,339,042.87 -63,009,449.36 the listed company -59.96% Net profit after deducting of non-recurring gain/loss attributable to the shareholders of 3,283,914.88 9,189,327.91 -79,276,897.16 listed company -64.26% Cash flow generated by business operation, net 3,428,116.94 13,067,666.22 -73.77% -32,941,408.32 Changed over End of 2008 End of 2007 End of 2006 last year（％） Gross Assets 406,383,398.21 434,451,241.87 -6.46% 420,220,483.91 Shareholders’ equity attributable to 249,362,995.21 245,223,630.03 1.69% 234,884,587.16 3 shareholders of the company Stock capital 383,000,000.00 383,000,000.00 - 383,000,000.00 2. Main Financial Indicators Unit：RMB Changed over last year Year 2008 Year 2007 Year 2006 （％） Basic gains per share 0.01 0.03 -66.67% -0.16 Diluted gains per share 0.01 0.03 -66.67% -0.21 Basic earning per share after deducting of non-recurring 0.01 0.02 -33.75% gains/losses -50% Net income on asset, fully diluted 1.66% 4.22% Decreased 2.56% -30.36% Net income on asset, Weighted 1.67% 4.31% Decreased 2.64% -33.75% Net income on asset, fully diluted 1.32% 3.75% -30.36% and deducted non-recurring gain/loss Decreased 2.43% Net income on asset, weighted and 1.33% 3.83% -0.09 deducted non-recurring gain/loss Decreased2.50% Net cash flow per share generated by 0.09 0.009 0.03 business operation -70% Changed over last year End of 2006 End of 2008 End of 2007 （％） Net asset per share attributable to 0.61 0.65 0.64 1.56% shareholders of the listed company (IV) Attached Schedule of Profit Statement Return on net assets（%） Earnings per share Profit for the report period Weighted Fully Fully diluted Fully diluted average diluted(EPS) Business profit 5,177,053.38 2.08 2.09 0.01 0.01 Netprofit attributable to shareholder of common share of 4,139,364.81 1.66 1.67 0.01 0.01 the company Net profit after deductingnon-recurring gains and losses attributable to 3,283,914.88 1.32 1.33 0.01 0.01 shareholder of commonshare of the cmpany Chapter 3 Particulars about Changes in Share Capital and Shareholders (I) The changes of share capital of the Company 1. The total number and the structure of the shares of the Company remained unchanged in the report period. 2. The statement of changes of share capital 4 Before this change Increase/decrease this time (+ , - ) After this change Issu Transf ing Bonu erred Propor of s Propor Amount from Other Subtotal Amount tion new shar tion reserv shar es es es 1.Shares with conditional 192,794,454 50.34% -95524 -95524 192,698,930 50.31% subscriptio n 1.State-own ed shares 2.State-own ed legal 192,456,657 50.25% 12,551 12,551 192,469,208 50.25% person shares 3.Other domestic 337,797 0.09% -108,075 -108,075 229,722 0.06% shares Incl ： Non-state owned domestic 326,000 0.085% -108,075 -108,075 217,925 0.057% legal person shares Domestic nature 11,797 0.003% 11,797 0.003% person shares 4.Foreign shareholdin g Incl： Overseas legal person shares Foreign nature person share II.Shares with uncondition 190,205,546 49.66% 95524 95524 190,301,070 49.69% al subscriptio 5 n 1.Common shares in 90,205,546 23.55% 95524 95524 90,301,070 23.58% RMB 2.foreign shares in 100，000，000 26.11% 100,000,000 26.11% domestic market 3.Foregn shares in overseas market 4.Other III. Total of capital 383,000,000 100% 383,000,000 100% shares Notes of Stock change: (1)Upon the implementation Shareholders Structure Reform of the Company, the Company's controlling shareholder Baoshi Group on behalf of the other non-tradable shareholders prepaid the consideration they should pay. On October 27 2008, Part of the original non-tradable shareholders returned 12,551 shares to Baoshi Group. (2) The reduction of other limited-sale shares is because that the limited-sale shares of part of the original non-tradable shareholders are cancelled (II) Particulars about the issuing and listing of shares 1.The Company did not issue new shares in the previous three years by the end of the report period. 2．In the reporting period, there are no changes in total share number and share structure of the company caused by giving shares, increasing shares and issuing new shares. 3. The Company did not issue inter Employee shares. (III) Particulars about shareholders 1.Number of shareholders and Particulars shareholders Unit：shares By the end of the report period, the Company had 27,532 shareholders in Total number of shareholders total, including 16,608 shareholders holding A shares and 10,924 shareholders holding B shares. Particulars about the shareholding of the top ten shareholders Nature of Proportion Quantity of Name of shareholder Conditional shares Pledged or frozen shareholder (%) shares held Shijiazhuang Baoshi State-owned 51.74% 198,159,208 192,469,208 0 Electronic Group Co., Ltd Legal person Merchants securities Foreign legal 1.50% 4,488,370 0 unknown Hongkong Co., Ltd. person Domestic Feng Jia 0.54% 2,501,300 0 unknown natural person Domestic Zhang Wenying 0.46% 2,270,086 0 unknown natural person Domestic Hu Xinping 0.39% 1,918,851 0 unknown natural person 6 Foreign legal Chen Lihong 0.30% 1,763,484 0 unknown person Domestic Wang Huaqiang 0.27% 1,734,659 0 unknown natural person Foreign legal Zheng Shunzhen 0.24% 1,600,620 0 unknown person CITRINE CAPITAL Foreign legal 0.23% 1,332,319 0 unknown LIMITED person Domestic Xiang Li 0.22% 1,169,574 0 unknown natural person Top 10 holders of unconditional shares Name of the shareholder Unconditional shares Type of shares Shijiazhuang Baoshi Electronic Group 5,690,000 RMB Common shares Co., Ltd. Foreign shares placed in domestic Merchants securities Hongkong Co., Ltd. 4,488,370 exchange Feng Jia 2,501,300 RMB Common shares Zhang Wenying 2,270,086 RMB Common shares Hu Xinping 1,918,851 RMB Common shares Foreign shares placed in domestic Chen Lihong 1,763,484 exchange Wang Huaqiang 1,734,659 RMB Common shares Foreign shares placed in domestic Zheng Shunzhen 1,600,620 exchange Foreign shares placed in domestic CITRINE CAPITAL LIMITED 1,332,319 exchange Xiang Li 1,169,574 RMB Common shares Among the top ten shareholders as listed above, there exists no associated Notes to the related relationship among the shareholders of legal person share. The relation relationship between the between the top ten shareholders was unknown. It was unknown whether top ten shareholders or they are persons taking concerted action specified in Regulations on the their concerted action Information Disclosure of the Change of Shareholding of Shareholders of Listed Companies. Notes：At the end of the report period, the amount of limited-sale shares held by does not include the amount of other prepaid shares the non-tradable shareholders shall repay. Change in conditional shares Unit：Shares Conditional Conditional shares at Released this Increased this Reason of Name of the shares at end of Date of releasing beginning of year year condition year year Conditional Shijiazhuang shares of Baoshi 192,456,657 12,551 192,469,208 share 2009.3.29 Electronic structure Group Co., Ltd. reform Liling Conditional Intellectual shares of Waterproof 91,850 91,850 - share 2008.12.5 material structure factory reform 7 Hebei 3,674 3,674 Conditional Electronic shares of Information - share 2008.12.5 Industry structure Company reform Total 192552181 95524 12551 192469208 － － Notes：This table does not include the information on limit-sale shareholders not changed in the reporting period. 2．Shareholding changes in shareholders who hold 5% of the shares of the company. At the end of the reporting period, the shareholder holding 5% of the shares of the company is Shijiazhuang Baoshi Electronics Group Co., Ltd., holding 198,159,208 shares of the company, of which: the shares with sale limit conditions are 192,469,208 shares, 12,551 shares increase than those at period beginning; Holds the liquid shares without sale conditions 5,690,000 shares, there is no change comparing with the period beginning. (1)Causes for shareholding changes: In the reporting period, Received the corresponding equity prepaid in the equity devision reform from the shareholders of original non-tradable 12,551 shares. 3.The equity of non-current shareholders in the top 10 shareholders and the conditions for limited on sale. Particulars Date when trading Shares with allowed of subscription conditions Name of conditions holder Conditions conditioned Date when Newly added trading allowed tradable shares 注 Shijiazhuang Baoshi 192,469,208 March 30,2009 192,469,208 1 Electronic Group Co., Note 2 Ltd. Note1：At the end of the report period, the amount of limited-sale shares held by does not include the amount of other prepaid shares the non-tradable shareholders shall repay. Note2：The shares shall not be listed, traded or assigned within 12 months from the dateof implementation of the plan for share holding structure reform. Upon the expiration of the said commitment period, the proportion of the quantity of original shares traded through stock exchange to the total shares of the Company shall not exceed 5% within 12 months and 10% within 24 months. 4. Particulars about the actual controllers of the Company The controlling shareholder of the company is shijiazhuang Baoshi Electronic Group Co., Ltd.Legal representative:ShangJianbin. Date of establishment: June 13, 2004.Registered capital: RMB 1.389 Billions, business SCOPE: Dealing In state-owned capital within authorized scope, color cathode-ray tube series products and supporting electronic components, etc, The actual controllers of the Company is China Great Wall Asset Management Co. China Great Wall Asset Management Co. is a solely state-owned financial enterprise with independent 8 corporate capacity. Shijiazhuang Representative Office is the detached organ of the head office. It is mainly engaged in acquisition, management and disposition of the bad assets separated from Hebei Branch of Agricultural Bank of China within authorized scope and financial and securities business approved by finance supervision department. 5.Particulars about the actual controllers of the Company The actual controllers of the Company is China Great Wall Asset Management Co. China Great Wall Asset Management Co. is a solely state-owned financial enterprise with independent corporate capacity. Shijiazhuang Representative Office is the detached organ of the head office. It is mainly engaged in acquisition, management and disposition of the bad assets separated from Hebei Branch of Agricultural Bank of China within authorized scope and financial and securities business approved by finance supervision department. 6.The block diagram of the title and control relationship between the Company and actual controller is as follows: China Great Wall China Orient Asset Shijiazhuang China Huarong Asset Asset Management Management State-owned Assets Management Co. Company Administration Company 48.3% 27.45% 17.74% 6.51% Shijiazhuang Baoshi Electronic Group Co., Ld 51.74% Shijiazhuang Baoshi Electronic Glass Co., Ld Chapter 4 Particulars about Directors, Supervisors, Senior Executives and Employees I. Particulars about directors, supervisors and senior executives 1. Basic information The total amount of Shares Increase/de remuneration Shares Date of beginning held at held at Name Title Sex Age the crease received from the year-begi and ending year-end nning amount the Company in the report period (RMB) 9 Shang Board 2006.9-2009.9 0 Male 50 0 0 0 Jianben chairman Song Director, 2006.9-2009.9 117504 Hongbo General Male 54 0 0 0 Manager Zhou Bo Director Male 43 2006.9-2009.9 9724 9724 0 0 Director, Fu 2006.9-2009.9 67536 Fema Board 41 0 0 0 Yinfang le secretary Yu Independent Male 62 2006.9-2009.9 0 0 0 10000 director Rengang Han Independent Male 44 2006.9-2009.9 0 0 0 10000 director Zhiguo Zhang Independent Male 40 2006.9-2009.9 0 0 0 10000 director Junhao Xie Chairman of 2006.9-2009.9 0 Mengxio the Male 52 0 0 0 ng supervisory committee Fan 2006.9-2009.9 0 Zhenpin Supervisor Male 52 1430 1430 0 g Li 2006.9-2009.9 34162 Supervisor Male 54 3432 3432 0 Huiming Hao 2006.9-2009.9 34969 Supervisor Male 55 0 0 0 Junze Li Hong Supervisor Male 54 2006.9-2009.9 1144 1144 0 24411 Wang 2006.9-2009.9 33648 Deputy GM Male 46 0 0 0 Xiaohu Zhou General 2006.9-2009.9 36618 Male 56 0 0 0 Yumao Accountan 2. Main work experience of the current directors, supervisors and senior executives over the Past five Years as at the End of the Report Period (1)Shang Jianbin: Board chairman. From March 2001 to October 2005, he served as vice board chairman of Shijiazhuang Oriental Thermal Power Co., Ltd. From October 2005 to June 2006, he served as deputy director of Shijiazhuang State-owned Assets Commission. Since June 2006, he has served as board chairman of Baoshi Group Co. Since September 2006, he has served as board chairman of the Company. 10 (2) Song Hongbo, director and general manager. From 1999 to June 2000, he served as director and general manager assistant of Baoshi Group Co. From June 2000 to June 2004, he served as director and general manager of the Company and concurrently served as director of Baoshi Group Co. Since June 2004, he has served as director and general manager of the Company. (3) Zhou Bo, director. From 1997 to June 2004, he served as director of the Company and concurrently served as director of Baoshi Group Co. and deputy general manager of Shijiazhuang Baoshi Electric Glass Co., Ltd. Since June 2004, he has served as director of the Company and concurrently served as director and general manager of Baoshi Group Co. and deputy general manager of Shijiazhuang Baoshi Electric Pin Glass Co., Ltd. （4）Fu Yinfang: Director and board secretary. From 2000 to July 2006, she served as legal adviser and deputy director of Party office. Since August 2006, she has served as director of Law and Securities Dept. of the Company. Since September 2006, she has served as director and board secretary of the Company. （5）Yu Rengang: Independent director. From August 2001 to November 2005, he served as secretary of Party committee and professor of Hebei Economy and Trade University. Since November 2005, he served as professor of Hebei Economy and Trade University. Since September 2006, he has served as independent director of the Company. （6）Han Zhiguo: Independent director. 2000 to September 2003，he served as teacher of Hebei Law College,Sine September ,2003，he has served as Lawyer of Zhengchen Law office, Since September 2006 , he has served as independent director of the Company. （7）Zhang Junhao: Independent director. Since 2000, he has served as project manager of Hebei Tianhua Certified Public Accountants Co., Ltd. Since September 2006, he has served as independent director of the Company. （8）Xie Mengxiong, supervisor. From 1997, he served as deputy secretary of Party committee of Baoshi Group Co. Since June 2004, he has served as supervisor of the Company and concurrently served as deputy secretary of Party committee of Baoshi Group Co. （9）Fan Zhenping, supervisor. He has served as supervisor of the Company since 1992 and concurrently served as deputy chief of Public Security Division of Baoshi Group Co. since April 1999. (10) Li Huiming, supervisor. Since 1997, he has served as supervisor and chairman of labor union of the Company. （11）Hao Junze: Supervisor. From 2000 to August 2006, he served as deputy director of Audit Dept. of Baoshi Group Co. Since August 2006, he has served as director of Audit Dept. of the Company. （12）Li Hong, supervisor. From 1997 to June 2000, he served as supervisor and deputy workshop superintendent of the Company. Since June 2000, he has served as supervisor of the Company and deputy director of Tool and Mould Factory; （13）Wang Xiaohu: Deputy general manager. From July 1999 to May 2006, he served as deputy factory director of Component Factory of the Company. Since May 2006, he as factory director of company factory fo the company, Since September 2006, he as Deputy General manager of Company and Director of component Factory. (14) Zhou Yumao, chief accountant. From May 1993, he served as deputy director of Management Dept. of Finance Co. of Baoshi Group Co. Since June 2000, he has served as chief accountant of the Company. 3. Posts held at corporate shareholders of the directors, supervisors and senior executives Name Unit Title Whether receiving remuneration or subsidy 11 Shang Jianbin Shijiazhuang Baoshi Electric Board chairman Yes Group Co., Ltd Zhou Bo Shijiazhuang Baoshi Electric Director, General Yes Group Co., Ltd Manager Xie Shijiazhuang Baoshi Electric Deputy secretary of Group Co., Ltd Yes Mengxiong Party committee Fan Zhenping Shijiazhuang Baoshi Electric Deputy chief of Group Co., Ltd Public Security Yes Division 4. Posts held at other units of the directors, supervisors and senior executives Name Unit Title Whether receiving remuneration or subsidy Shang Jianbin Shijiazhuang Baoshi Electric Pin Board chairman No Glass Co., Ltd. Zhou Bo Shijiazhuang Baoshi Electric Pin Director No Glass Co., Ltd. Yu Rengang Hebei Economy and Trade professor Yes University Han Zhiguo Zhengchen Law office Lawyer Yes Zhang Junhao Hebei Tianhua Certified Public Project Yes Accountants Co., Ltd manager 5. Annual remuneration (1) The procedure of deciding the remuneration and the basis for determining remuneration In the report period, post skill wage system applied to the directors, supervisors and senior executives of the Company. Their remuneration is determined according to the wage management system of the Company. The remuneration of independent directors is determined by shareholders' general meeting. (2) The annual remuneration of the current directors, supervisors and senior executives Except that Shang Jianbin,Zhou Bo,Xie Mengxiong and Fan Zhenping receive remuneration from corporate shareholders, other directors, supervisors and senior executives all receive remuneration from the Company. The annual subsidy of independent directors is RMB 10000 / person. 6. Change of directors, supervisors and senior executives in the report period On March 26, 2008，The 13th meeting of the Fifth Board of the Company agreed Zhang Wenhai to resign from the Company’s deputy general manager position because of retiring reasons. On March 26, 2008, The 9th Meeting of the Fifth Supervisory Committee of the Company agreed Lin Xiang and Wang Zhining to resign from the Company’s Supervisors position because of works reasons. In the report period, there were no changes happened in the positions of other directors, supervisors and senior managers. II. Particulars about employees As of December 31, 2008, the Company has 660 staff members in total, including 466 production staff members, 14 sales staff members, 78 technical staff members, 15 financial staff members, 87 administrative staff members. The personnel with university, college and secondary specialized school education accounted for 37% of the total staff and workers.25% of the staff had professional technical titles. The number of the retired staff whose retirement pension is paid by the Company is 78. 12 Chapter 5 Corporate Administration Structure I.Particulars about corporate administration The company unceasingly improves its corporate governance structure, establishes the sound modern enterprise system, strengthens standardized operation and strives to improve the corporate governance level pursuant to the Company Law, Securities Law, Code of Corporate Governance for Listed Companies in China, Stock Listing Rules of Shenzhen Stock Exchange and relevant laws and regulations and normative documents of the CSRC and in comparison with the relevant laws such as the Company Law and Securities Law. On the basis of special campaign on corporate governance of listed companies in 2007 and pursuant to the Notice on the Matters concerning Carrying out a Special Campaign to Strengthen the Corporate Governance of Listed Companies (ZJGS Zi [2007] No. 28) promulgated by the CSRC, China Securities Regulatory Commission Official Bulletin ([2008] No. 27) and Notice Concerning the Further Promotion of Special Campaign on Corporate Governance (JZJF [2008] No. 89) issued by Hebei Provincial Regulatory Bureau of the CSRC, the company made an in-depth self-check and conclusion over again aimed at fulfillment of rectification report and results of rectification in the special campaign on corporate governance in 2007, with emphasis on the check and serious rectification in the establishment of a long-acting mechanism preventing from funds occupancy of major shareholders and perfection of the information disclosure system. Mainly demonstrating the following aspects: (1) Having revised and perfected the Articles of Association, Information Disclosure Management System and Financial Management System of the company according to the laws and regulations and requirements of the regulatory authorities as well as the actual situation of the company; (2) Having perfected the internal control system and set down the internal control systems of the company including the Internal Report System of Corporate Material Information, Connected Transaction Management System, Measures of the company for Prevention from Funds Occupancy, Sensitive Corporate Information Investigation Management System and Accountability System for the Corporate Management. (3) Having intensified the recovery of accounts receivable, signed a repayment plan with affiliated companies, made efforts to press them to make repayment according to this plan and reduced the accounts receivable of the company. Up to the end of the report period, the company has basically completed all rectification work in the special campaign on corporate governance which further improved the actual governance of the company. At present, the company possesses the substantially sound governance systems, standardized management and operation and perfect corporate governance structure. In the future, the company will, as always, standardize its operation according to the relevant laws and regulations, attach persistent importance to launching the special campaign on corporate governance and self-check and rectification work to further strengthen the awareness of standardized operation and risk control of directors, supervisors and senior management of the company, keep improving and perfecting the corporate governance level in strict compliance with the relevant laws and regulations and requirements of normative documents, protect the interests of medium and minor shareholders, and ensure and promote a sound and steady development of the company. II. Particulars about duty performance of independent directors 13 In the report period, Three independent directors of the company, according to the relevant provisions of the CSRC and the Articles of Association, Rules of Procedures of the Board of Directors and Working System for Independent Directors, have been seriously and independently doing their work and fulfill their duties, punctually attending the meetings of the Board of Directors, giving their own opinions in earnest, expressing their independent opinions on significant matters such as connected transactions, and playing a better role as the independent directors in suggesting workable development strategies to the company. During the report period, these independent directors made no objection to motions deliberated at all meetings of the Board of Directors and other matters of the company and carefully went through all matters incurred in the company which require their opinions as well as issued written opinions of independent directors. Attendance at board meetings by independent directors: Name of The supposed times Attendance Attendance Absence independent of attendance this in person through agent Remarks (times) director year (times) (times) Yu Rengang 7 7 0 0 Han Zhiguo 7 7 0 0 Zhang Junhao 7 7 0 0 III. Separation of the company and the controlling shareholders in business, personnel, assets, institutions, and finance. In the reporting period, , the company carried out active rectification and reform in accordance with the existing problems in the company, and improved company governance standards.The Company has made efforts to realize separation from its controlling shareholder in respect of business, personnel, assets, organs and finance according to relevant requirements of CSRC. The Company and the controlling shareholder respectively have independent and complete business and the ability of independent operation. 1. Business: The Company is independent of its controlling shareholder, owns independent and complete production, sales and finance system and independently conducts operation management activities within statutory business scope. 2. Personnel: The Company is completely independent in respect of labor, personnel and wage management. The general manager, deputy general managers and other senior executives of the Company all received remuneration from the Company, who did not held any position at any corporate shareholder. 3. Assets: The property right relationship between the Company and the controlling shareholder is clear and the Company owns independent production system and supporting facilities. 4. Organ: In accordance with relevant laws and regulations including the Company Law and the Securities Law, the Company established organs including shareholders' general meeting, the board of directors and the supervisory committee, formulated basic work regulations including Rules of Procedure of Shareholders' General Meeting of the Company, Rules of Procedure of the Board of Directors and Rules of Procedure of the Supervisory Committee, established and perfected decision making system. The controlling shareholder of the Company participated in the Company's 14 decision making according to legal procedure and did not affect the independence of the Company's operation management. The Company did not work side by side with its controlling shareholder. 5. Finance: The Company has established independent finance department, independent accounting system and financial management system and opened independent bank accounts. It independently pays tax according to law. The accounting personnel do not hold concurrent posts at the controlling shareholder. IV. Establishment and perfecting of company internal control 1. Overview of company internal control The company unceasingly improves the establishment and implementation of its internal control system according to the relevant laws and regulations as well as in combination with the rectification campaign of Hebei Provincial Regulatory Bureau of the CSRC and the self-check of the company. At present, the company has set up and perfected its corporate governance structure including the general meeting of shareholders, board of directors, board of supervisors and the corporate management and established its perfect internal control system relating to production and operation, financial management and information disclosure. During the report period, the company revised and perfected its Articles of Association, Information Disclosure Management System and Financial Management System according to its actual situation, set down its internal control systems including the Internal Report System of Corporate Material Information, Connected Transaction Management System, Measures of the company for Prevention from Funds Occupancy, Sensitive Corporate Information Investigation Management System and Accountability System for the Corporate Management, perfected its internal control system and promoted the establishment and perfection, implementation and effective supervision of its internal control system in a comprehensive way. The company will establish or duly update the related internal control system in the future with the constant changes of laws and regulations and according to the developing situation of the company. 2. The key internal control activities The company basically established relatively reasonable and perfect internal control system pursuant to the laws and regulations such as the Company Law, Code of Corporate Governance for Listed Companies in China and Guidelines for the Internal Control of Listed Companies and has been unceasingly improving all items in this system. The internal control system of the company can presently meet the management requirements and the needs of development of the company and has been followed and implemented, and it facilitates the improvement of the standardized operation and corporate governance level of the company. The company will also, according to its developing situation and supervision requirements and with reference to the deficiencies found during the implementation of its internal control system, continue to perfect the construction of its internal control system, keep improving and strengthening its internal control system and increase the effectiveness of the internal control to lay a solid foundation for a sound and steady development of the company. 3. Views of independent directors’ self-assessment on internal control The company has set up a relatively sound internal control system, which is in line with the requirements of state laws, administrative regulations and departmental regulations. The internal control system is legitimate, reasonable and effective. The governance, production management, information disclosure and major issues of the company are conducted strictly in accordance with the regulations of all internal control systems. The internal control of the company is effective. The evaluation report on internal control objectively reflects the actual situation of the construction, implementation and monitoring of current internal control system. 4. Views of supervisors’ self-assessment on internal control 15 The self-assessment of internal control is in line with the requirements in Internal Control Guidance for Listed Companies issued by Shenzhen Stock Exchange and other related documentation; the self-assessment truly and completely reflects the current status of establishment, improvement and implementation of internal control system and the main problems; on the whole, the evaluation of internal control is objective and accurate. Chapter 6 Brief Introduction to Shareholders' General Meeting In the report period，the Company held one shareholders’ general meeting and Two relevant shareholders' meeting. Relevant particulars are as follows: The Company held the relevant 2007 shareholders' meeting in the meeting room of the office building of the Company at 10:00 a.m. of April 28, 2008. The announcement of relevant resolutions was published on China Securities Daily, Hong Kong Commercial Daily and www.cninfo.com.cn on April 29, 2008. The Company held the relevant 2008 provisional shareholders' meeting in the meeting room of the office building of the Company at 10:00 a.m. of December 30, 2008. The announcement of relevant resolutions was published on China Securities Daily, Hong Kong Commercial Daily and www.cninfo.com.cn on December 31, 2008. Chapter 7 Report of the Board of Directors I.Operating status of the Company 1. The scope of main operation and its operating status The Company is engaged in the electronic parts and components industry, mainly in the manufacturing and sales of electronic vacuum glass devices and supporting electronic parts and components, export of the self-produced products of the Company and the import of mechanical equipment, parts and components, raw and auxiliary materials needed by the Company. In the report peiod, the company faced a big challenge in the production and operation due to continuously shrinking CRT market, steadily rising energy & power prices, worsening situation of working of customers' funds and strong impact of private enterprises. The company’s management led numerous employees to dare to bear the huge pressure and test brought about by the market and kept innovating in the way of thinking closely around the annual objective and tasks of production and operation to strive to accomplish the annual production and operation plan by striving for survival on the basis of quality, seeking development by new products, making concerted effort, snatching up opportunities and striving for success tenaciously. On the condition of depressions of the whole CRT industry the company still made a profit, which laid a solid foundation for the further development of the company. In the report period, the output of pins, anode caps and L-35 glass tubes was 93.817 million, 4.924 million and 52.8609 tons respectively. The sales volume of pins, anode caps and L-35 glass tubes was 91.596 million, 9.415 million and 23.8602 tons respectively. In the report period, income from main operation, Total amount of Profit ,Net Profit, Gross profit rate of product of the Company were RMB 205.225 million, RMB 5.1214 million, RMB 4.1395 and 13.8% respectively. The volume of pins, anode caps and L-35 glass tubes market share of its products were 28% ,18.5% and 80% respectively. 16 II.The Company's main operation and its operating status (1). Table of the status of main operation in terms of business line and product(unit:RMB’0000) In terms of Rate of Increase/decrease Increase/decrease Increase or decrease Income Cost of profit of income from business line of cost of main of rate of profit from from main main from main main operation operation over the main operation over operation operation operation over the previous previous year (%) the previous year (%) (%) year (%) Kinescope parts and components for color TV 10372.92 7865.93 24.17 20.08 10.29 Decrease 6.73% Rate of Increase/decrease Interms of Increase/decrease Increase or decrease Income Cost of profit of income from of cost of main of rate of profit from business from main main from main main operation operation over the main operation over product operation operation operation over the previous previous year (%) the previous year (%) (%) year (%) Kinescope parts and components for color TV 10372.92 7865.93 24.17 20.08 10.29 Decrease6.73% （2）Table of the status of main operation in terms of area (unit:RMB’0000) Increase/decrease of income from main Area Income from main operation operation over the previous year (%) North China 10372.92 20.08 3. Main suppliers and customers The total amount of purchase from the top five suppliers accounted for 67.55% of the total purchase amount of the year. The total amount of sales to the top five customers accounted for 98.81 % of the total sales amount of the year. 4. In the report period, Assets structure and expenses charge（Unit：RMB） （1）Assets structure and expenses charge Items Amount Proportion Increase and Change Cause End of 2 Beginning Decrease（%） Year 2008 Year 2007 008 of 2008 The big notes receivable reduced because the power business were transferred Bill receivable 1,340,000.00 13,595,138.65 0.33 3.13 -90.14 to the group Because in 2007, the purchase of steel was required to prepay, and in Account 2008, the demand of advanced 968,879.52 8,437,464.16 0.24 1.94 -88.52 prepaid money reduced. 17 Bill payable 1,082,099.08 89,999.90 0.27 0.02 1102.33 Delay the time to pay The power business transferred to the group, so the payable power cost Account payable 21,823,254.90 37,695,196.84 5.37 8.68 -42.11 reduced. The payable taxes and expenses increased because the reduction of Tax of payable -579,123.63 -4,779,154.16 -0.18 -1.1 87.88 value-added tax. The debt to Baoshi Group Other payable 24,213,158.91 41,028,540.44 5.96 9.44 -40.98 reduced at the period end. The environment treatment fund allocated by government can not be included in the current Deferred loss and gain according to Income 165,000.00 - 0.04 0 - regulations. （2）Expenses structure and expenses charge Items Year 2008 Year 2007 Increase Change Cause and Decrease （%） Key business tax and surtax 1,206,623.44 887,202.72 36 The sale of glass tube increased The glass tube factory branch increased sales staff, and accordingly the cost Sale Expenses 2,305,340.05 854,857.59 169.68 for salary of sales staff increased. Impairment was accounted due to market factor, and in the same period of last year, the value achieved and the Losses form Assets devalue 4,271,135.04 -5,824,228.79 173.33 impairment transferred back Mainly due to the profitability in Operating profit 5,177,053.38 18,843,034.48 -72.53 component factory reduced. The invironment treatment fund allocated by Shijiazhuang Finance Payment Center should be confirmed as Non-operating income 35,000.00 - - the loss and gain in the current year. In the same period of last year, more losses formed due to the disposal of Non-iperating expenses 90,625.10 376,692.84 -75.94 provisional tents. In the same period of last year, the income from taxes receivable and the Income tax expenses 223,569.71 7,322,473.86 -96.95 cost for deterred income tax. Mainly due to the profitability in Total profit 5,121,428.28 18,466,341.64 -72.27 component factory reduced. Net profit attributable to shareholders of the Mainly due to the profitability in company 4,139,364.81 10,339,042.87 -59.96 component factory reduced. 5. Cash flow from operating activities in the report term 18 Items Year 2008 Year 2007 Increase and Change Cause Decrease（%） Other cash received from -69.75 The decrease of income from business activities 2,211,042.09 7,308,712.95 sale of wastes -47.07 The value-added tax Taxes paid 8,034,986.69 15,181,514.52 reserved in last year was big. Other cash paid for business -39.08 Strengthen the management activities 4,085,533.39 6,706,837.68 of expenses 6. In the reporting period, there were no other operational business activities which constituted great impact on profit. 7. In the reporting period, there was such case that the investment income of a single shareholding company had more 10% impact on the net profit of the company. 8. The operation information and performance of the controlling company of the company. (1)With registered capital of RMB 540.68 million, Shijiazhuang Baoshi Color Glass Bulb Co., Ltd. (SBCB) is a controlled subsidiary of the Company. The Company owns 81.26% equity of SBCB. In the report period, SBCB earned operating income of RMB 1.8815 million and net profit of RMB 4.0475 million. (2) With registered capital of RMB 0.5 million, Shijiazhuang Baolihua Scientific Trade Co., Ltd. is a controlled subsidiary of the Company. The Company owns 40% equity of Shijiazhuang Baolihua Scientific Trade Co., Ltd.. The joint venture company of the company Shijiazhuang Baolihua Scientific Trade Co., Ltd. had not started to operate, and the company had no investment income in the current year. 9. There were no such bodies that were not controlled with special purpose. II. Forecast of the Company's future development 1.Forecast of the Company's future development The rise of flat panel television has brought unprecedented impact on the global CRT industry, and CRT television market share is also squeezed. In view of the global market, the annual market growth of LCD TV is above 20%. Influenced by LCD TV substitution, the market demand for CRT TV in the world is shrinking year by year. Similarly, with the shrinking of global CRT, China’s TV market also shows gradual replacement of CRT TV by flat panel TV. However, with more than 50 years of development, CRT TV has formed steady and complete industrial chain of production and auxiliary supply, with mature production technology and large production capacity, while the product stability and price performance ratio tends to be perfect. CRT color TV still has obvious strength in the aspects of image brightness, contrast, color repeatability, dynamic resolution and high performance price ratio. Although the sales volume of CRT TV in the major cities is decreasing gradually, in the rural market, due to its high performance cost ratio and long service life design, CRT TV is still the main consumption stream. With the implementation of the national policy of “household appliances going to the rural area”, the life time of CRT TV will be extended. Besides, CRT industry is continuously looking for new technical breakthrough. Therefore, in a long period in the future, our color TV market will be a competitive layout, with CRT TV as the main product, complemented with LCD and plasma TV product. 19 The Company's leading products are electronic components supporting traditional color television. The Company has strong market competitiveness in the industry at home and abroad in respect of technology, scale and product quality. 2. Business plan for the new year The industrial upgrading of the color TV industry and influence of the world financial crisis make the company face greater difficulties than ever, how to realize the sustainable development of the company where chances and challenges coexist will still be the focal point of the work in a new year. (1) The glass tube factory must keep stabilizing the lead glass tube process, strive to improve the product pass rate, tap the latent capacity and reduce consumption, save energy and reduce emissions and lower costs; consolidate and exploit the markets and duly adjust its manufacturing and marketing strategies according to the changes of markets. expand international marketplace, enhance export proportion (2) The components factory must keep strengthening its quality management, increase the proportion of purchased home materials, reducing the product costs and try hard to extend the existing market share; continue to intensify the development of new products, increase the output of Schott stamping parts products, spare no effort in realizing the product certification and batch production and sales of polar caps as new materials, and increase the market share of anode caps; make great efforts to exploit the overseas markets, strive to earn foreign exchange through exports of anode caps and open the overseas markets at the same time, and increase the economic growth point; do its best to develop other glass sealing products, cars and related stamping parts products such as lighting accessories to form a new profit growth point as early as possible. (3) Strengthening the collection of accounts receivable centering on collection of old accounts and ensuring the safe and efficient working of funds. (4) Accelerating to contrive the assets reorganization and realizing the product transformation as early as possible to ensure the sustainable management of the company. 3. Risk factors that possibly have adverse influence on the future development strategy and operation objective of the Company and the countermeasures The main products of the company are auxiliary electronic components of CRT color products, and the steadily shrinking CRT market renders the whole industry to enter transformation and principal business of the company to receive a larger impact. For this reason the company strengthened its internal management and set down a business policy to try hard to reduce the product costs centering on the guiding ideology of gaining benefits from management, stabilized the firing system by changing the firing method of furnaces and increased the product pass rate; intensified technological breakthrough and realized the percentage of all home-made materials for production of dowels; executed the strict quality control and quality assessment with attention on the user’s requirements, strengthened the quality management and technical service work; accelerated the technical innovation, increased the investments in new products and increased the potential for development of the company. III. Investment in the reporting period 1. Projects invested by fund raising In the reporting period, the company had no newly raised funds, there were no such situations that the raised funds before this period deterred to this period. 2. Major projects that invested by non-raised funds in the reporting period. During the reporting period, the company had no major projects that invested by non-raised funds. IV.Routine work of the board of directors 20 1. Board meetings and resolutions in the report period In the report period, the Company held 7 board of director. Relevant particulars are as follows: (1). The 13th meeting of the fifth board of directors was held on March 26, 2008，The announcement of resolutions of this meeting were published on China Securities Daily,Hong Kong Commercial Daily and www.cninfo.com.cn on March 27,2008. (2). The 14th meeting of the fifth board of directors was held on April 24, 2008，The announcement of resolutions of this meeting were published on China Securities Daily,Hong Kong Commercial Daily and www.cninfo.com.cn on April 25,2008. (3). The 15th meeting of the fifth board of directors was held on July 30, 2008，The announcement of resolutions of this meeting were published on China Securities Daily,Hong Kong Commercial Daily and www.cninfo.com.cn on July 31,2008. (4). The 16th meeting of the fifth board of directors was held on August 13, 2008，The announcement of resolutions of this meeting were published on China Securities Daily,Hong Kong Commercial Daily and www.cninfo.com.cn on August 14,2008. (5). The 17th meeting of the fifth board of directors was held on October 20, 2008，The announcement of resolutions of this meeting were published on China Securities Daily,Hong Kong Commercial Daily and www.cninfo.com.cn on October 21,2008. (6). The 18th meeting of the fifth board of directors was held on November 18, 2008，Relevant resolution was sent to Shenzhen Stock Exchange for record. (7). The 19th meeting of the fifth board of directors was held on December 11, 2008，The announcement of resolutions of this meeting were published on China Securities Daily,Hong Kong Commercial Daily and www.cninfo.com.cn on December 13,2008. 2. Implementation by the board of directors of the resolutions of the shareholders' general meeting The board of directors duly implemented all resolutions of the shareholders' general meeting in the report period. 3. Summary report on duty performance of the audit committee under the board of directors Pursuant to the relevant provisions of the CSRC and Shenzhen Stock Exchange, working rules of the Audit Commission of the company, annual report working system for independent directors of the company, annual report system of the Audit Commission of the Board of Directors, the Audit Commission of the Board of Directors of the company mainly performed the following job duties: (1) Before the certified public accountants for annual audit accessed to the site, the Audit Commission carefully reviewed financial accounting statements prepared by the company, expressed the Opinions Concerning Review of Financial Statements in 2008 prepared by the company, In its opinion, the preparation of the Company's financial statements for 2008 basically complies with laws and regulations, the Articles of Association and internal management system of the Company and the information contained therein basically reflects the financial position and operating results of the Company for the year. and through discussion and negotiation with the certified public accountants for annual audit determined the schedule of audit work of financial statements and sent a Reminder Letter (1) on Audit Work in 2008 to these certified public accountants for annual audit，urged them to submit auditor's report within agreed time. （2）After the certified public accountants for annual audit gave preliminary opinions, the audit committee reviewed the financial and accounting statements of the Company again. In its opinion, the content and format of the financial and accounting statements for 2007 audited by the certified public accountants for annual audit comply with relevant regulations of CSRC, Shenzhen Stock Exchange and Accounting Standards for Business Enterprises and gave a fair view of the Company's financial position as at December 31, 2008 and its operating results and cash flow for the year then ended. and through discussion and negotiation with the certified public accountants for annual audit determined the schedule of audit work of financial statements and sent a Reminder 21 Letter (1I) on Audit Work in 2008 to these certified public accountants for annual audit，urged them to submit auditor's report within agreed time. （3）After the certified public accountants for annual audit issued official auditor's report, the audit committee reviewed the audited financial and accounting statements for 2008. In its opinion, the preparation of the Company's financial statements for 2008 basically complies with laws and regulations, the Articles of Association and internal management system of the Company and the information contained therein gives true and fair view, in all aspects, the financial position and operating results of the Company for the year. The standard unqualified auditor's report issued by Zhongxi Certified Public Accountants Co., Ltd. for the Company's financial reports for 2008 gives true and objective view of the Company's financial position, operating results and cash flow and the audit conclusion reflects the Company's actual conditions. （4）The audit committee submitted to the board of directors the evaluation report on the audit work of Zhongxi Certified Public Accountants Co., Ltd. for the Company in the report year. In its opinion, Summary report on duty performance of the remuneration committee under the board of directors。 4. Summary report on duty performance of the remuneration committee under the board of directors Summary report on duty performance of the remuneration committee under the board of directors The remuneration and examination committee of the Board of Directors reviewed the remunerations of directors, supervisors and senior management of the company and examined the performance of duties of directors, supervisors and senior management of the company by performing its duties in real earnest in strict compliance with the working rules，In its opinion, the remuneration (allowance) of the directors, supervisors and senior executives disclosed in 2008 annual report of the Company was paid according to the wage management system of the Company and the remuneration of independent directors was paid according to the amount determined by shareholders' general meeting. The remuneration and appraisal committee accepted it. 5. Profit distribution preplan 1. Profit distribution preplan As audited by Zhongxi Certified Public Accountants Co., Ltd., the net profit of the Company for 2008 was RMB 4,139,364.81 . As the Company still has uncovered losses of RMB -546,136,695.97, The net profit of the Company for 2008 will be used to make up the losses of the Company for previous years according to relevant accounting regulations. the board of directors of the Company decided neither to distribute profit nor capitalize any capital surplus for the report year. This preplan is to be submitted to 2008 annual shareholders' general meeting for examination. 2. Particulars about the cash bonus of the Company in previous three years Unit：RMB Year Ratio of net profit Net profit attributable to attributable to Amount of cash bonus owners of parent owners of parent (Included tax) company in company in consolidated consolidated statement Year 2007 0 10,339,042.87 - Year 2006 0 -63,009,449.36 - Year 2005 0 -365,092,524.89 - 22 6. Miscellaneous The newspapers selected by the Company for information disclosure remained China Securities Daily, Hong Kong Commercial Daily and www.cninfo.com.cn ,No change in the report period. Chapter 8 Report of the Supervisory Committee I.The meetings of the supervisory committee In the report period, the supervisory committee held 5 meetings in total. The particulars of the meetings are as follows: 1. The 9th meeting of the Fifth supervisory committee of the Company was held on March 26,2008. The meeting examined and adopted the following: (1) The meeting examined and adopted 2007 work report of the supervisory committee of the Company; (2) The meeting examined and adopted 2007 annual report of the Company and 2006 annual report of the Company its summary; (3) The meeting examined and adopted Final accounting report of the Company for 2007; (4)The meeting examined and adopted the self evaluation concerning the Company's internal control; (5) The meeting examined and adopted the proposal concerning the resignation application of Lin Xiang and Wang Zhi Ning from the position of supervisor of the Company for work-related reason. (6). On Dec 12, 2008, the fifth supervisory committee of the Company held the 14th meeting to study relevant documents promulgated by CSRC. No resolution was made. 2. The 10th meeting of the Fifth supervisory committee of the Company was held on April 24, 2008. The meeting examined and adopted Report for the First Quarter of 2008. 3. On July 7, 2008, the fifth supervisory committee of the Company held the 11th meeting to study relevant documents promulgated by CSRC. No resolution was made. 4.The 12th meeting of the Fifth supervisory committee of the Company was held on August 13, 2008. The meeting examined and adopted 2008 annual report of the Company its summary; 5. The 13th meeting of the Fifth supervisory committee of the Company was held on October 20, 2008. The meeting examined and adopted Report for the Third Quarter of 2008. II. The independent opinions of the supervisory committee of the Company (1) The operation of the Company according to law In the report period, the Board of Supervisors of the company, according to the national relevant laws and regulations, supervised the convening procedure and resolution matters of the general meeting of shareholders and board of directors of the company, execution of resolutions of the general meeting of shareholders by the Board of Directors, performance of duties by the senior management of the company and implementation of the management system of the company, and it holds that the Board of Directors responsibly did the fruitful work during the report period, the work in 2008 could be operated according to the national relevant laws and regulations, the Articles of Association and resolutions of the general meeting of shareholders and the decision procedure was legitimate; the company established and perfected the corresponding internal control system while it gradually improved the corporate governance structure; no directors and managers of the 23 company were found to have breached any laws and regulations and the Articles of Association and damaged the interests of the company and shareholders when they performed their duties. （2）The 2008 financial reports of the Company truly reflected the financial status and operating results of the Company. Zhongxi Certified Public Accountants Co., Ltd. issued auditor's report with highlighted points. （3）. The Company did not raise funds in the report period. （4）The Company neither acquired nor disposed of assets in the report period. （5）. The related transactions were fair and did not harm the interests of the Company. Chapter 9 Important Events I.The Company was not involved in any material lawsuit or arbitration in the report period. II. In the report period, the Company did not hold any share of other listed companies or intended listed companies or financial enterprises such as commercial banks, securities companies, insurance companies, trust companies and futures companies. III. The Company neither acquired nor disposed of assets nor was involved in any merger by absorption in the report period. IV. Material related transactions 1. The related transactions in respect of purchase and sales of commodities and provision of labor service Related parties Contents of Transaction Pricing Mod Proporti Influence transactions amount (RMB) principle e of on of the on the settl same profit of eme kind of the nt transacti Company on Sales of Make price and finished two sides Curre Profit products 37,940,204.56 agreement ncy 33.82 increase Sales of Make price and two sides Curre Profit power 13,107,186.07 agreement ncy 11.63 increase Assets lease of Make price and service two sides Curre Profit 421,891.61 agreement ncy 100 increase Provision of Make price and two sides Curre Profit labor service 1,424,069.07 agreement ncy 5.5 increase Baoshi Group Co. Provision of Make price and (controlling shareholder) repair service two sides Curre Profit 108,475.33 agreement ncy 0.42 increase Make price and Purchase Raw two sides Curre Less materials 1,892,169.17 agreement ncy 3.14 affected Make price and Assets lease fee two sides Curre Less of payable 1,885,000.00 agreement ncy 100 affected Make price and Purchase Group two sides Curre Less power 1,257,183.17 agreement ncy 100 affected Make price and Group labor two sides Curre Less feeof payable 6,406,421.89 agreement ncy 100 affected 24 Sales raw Make price and materials and two sides Curre Profit finished product 9,932,448.27 agreement ncy 16.28 increase Make price and SBEG Sales of two sides Curre Profit (Controlled by the same power 76,495,754.42 agreement ncy 67.87 increase Make price and parent company) Provision of two sides Curre Profit repair income 962,779.88 agreement ncy 3.72 increase Make price and two sides Curre Profit Lease incime 1,905,561.70 agreement ncy 100 increase As the products of the Company and the above related parties have upstream-and-downstream relationship and their production is in the same place, the occurrence of the above related transactions is necessary and normal. If product structure and production site do not change, the above related transactions will continue to occur. 2. The Company neither acquired nor disposed of assets nor was involved in any merger by absorption in the report period. 3. The Company was not involved in related transactions caused by external investment with related parties in the report period. 4. The credit (debt) relationship between the Company and related parties Related party Amount Reason of Influence on the Company (RMB’0000) formation Share of energy and power on the Baoshi Group Co. Operating same production site 236.11 (controlling shareholder) debts Share of energy and power on the SBEG Operating same production site 9675.41 (Controlled by the same parent company) debts V. Important contracts and their performance 1.The Company did not provide guarantee to others in the report period. In the report period, In order to settle the problem of arrearage of affiliated companies in energy and power charges, the company entered into a negotiation with China GEMSY Co., Ltd. as a controlling shareholder about transferring the energy and power supply business formerly in the charge of the company to China GEMSY Co., Ltd. for unified management and external settlement, monthly settling on the basis of actual amount the charges for energy and power such as water and electricity and gas which will be purchased by the company from China GEMSY Co., Ltd. and as well releasing the energy and power assets relating to water and electricity and gas which were formerly operated by the company to China GEMSY Co., Ltd. for operation and transferring the labor service of the related personnel, for which the company will monthly collect the lease fee and related expenses of about RMB958,400 from China GEMSY Co., Ltd. 2. The Company did not provide guarantee to others in the report period. On September 18, 2006, the Company provided guarantee, together with Shijiazhuang Baoshi Electronic Group Co., Ltd., for the application of Shijiazhuang Construction Investment Co., Ltd. for loan of RMB 70 million) with some land and houses (with appraised value of RMB 30.3018 million) (The valid guarantee value for the Company is RMB 18.80 million). The guarantee period is one year. The type of guarantee is mortgage guarantee.This guarantee has expired. In respect of the loss that may occur to the Company due to this guarantee, the controlling shareholder has made corresponding commitment. 25 (3) The Company did not entrust others to manage its cash assets in the report period nor did such entrustment occurred in previous periods continue in the report period. 6. The commitments made by the Company and shareholders holding over 5% of the total shares of the Company In addition to statutory minimum commitment, the controlling shareholder of the Company Baoshi Group Co. made the following special commitments: (1) Commitment concerning selling price If non-negotiable shares held by it are sold through Shenzhen Stock Exchange within 36 months from the date of obtaining the right of negotiation, the selling price shall not be lower than RMB 2.5 per share (In case of dividend distribution, bonus share distribution and capital surplus capitalization, such price shall be treated on ex-right and ex-dividend basis). If the price of the shares sold through securities exchange within the said term is lower than RMB 2.5 per share, the proceeds of selling shares shall belong to the Company. (2) To advance the consideration to be paid by shareholders holding non-negotiable shares who have not explicitly agreed to the plan In order to smoothly carry out this share holding structure reform, Baoshi Group Co. promised to advance the consideration to be paid by the shareholders holding non-negotiable shares who had not explicitly agreed to the plan as of the stock right registration date for the implementation of this plan for share holding structure reform for the obtainment of the right of listing and negotiation of the non-negotiable shares held by such shareholders. In the report period, Baoshi Group Co., the controlling shareholder of the Company, and other shareholders holding shares subject to sale restriction strictly fulfilled their commitments made in the Company's plan for share holding structure reform. VII. Selling of stocks of the Company by the controlling shareholder of the Company The controlling shareholders of the company did not reduced their shares of the company in the reporting period. VIII. The engagement of certified public accountants and the payment of remuneration In the report period, the Company held 2007 Annual Shareholders Meeting, and agreed to employ Zhongxi Certified Public Accountants Co., Ltd. as the audit agencies of the Company. The cost for auditing was to be RMB 0.37 million，The traveling expenses were borne by the audit bodies themselves. Zhongxi Certified Public Accountants Co., Ltd. had provided audit services to the Company for 2 consecutive years. IX.Punishment and rectification to the Company In the report period, all the directors, supervisors, senior Senior Executives and Staff of the Company did not receive inspections, administrative penalties, notices of criticism from China Securities Regulatory Commission and public condemn from Stock Exchange. X. The Company's acceptance of investigation and research and interview In the report period, the Company did not accept investigation and research or interview. The investors received by the company mostly are individual investors. The company mainly provides advisories on the progress of company restructure, 2008 performance and company operational business status. .The Company answered the questions of personal investors strictly according to the Guidelines of Shenzhen Stock Exchange for Fair Information Disclosure of Listed Companies and in the light of the principle of openness, impartiality and fairness. It did not separately disclose its non-public important information to specific objects in private, in advance or on selection basis and guaranteed the fairness of information disclosure. Chapter 9 Financial Reports 1. Auditor’s Report(attached hereinafter) 26 2. Accountant Statements (Attached hereinafter) (1) Balance Sheet (2) Profit Statement (3) Cash Flow Statement (4) Statement on changes of owners’equity 3. Notes to Financial Statements (Attached hereinafter) Chapter 10 Documents Available for Inspection 1.The original Annual report bearing the signature of the Chairman of the Board of Directors of the Company; 2.The text of the financial report bearing the seal and signature of the person in charge of the Company, financial ontroller and the person in charge of accounting organ 3.The original of all Company’s documents and the original manuscripts of announcements publicly disclosed on China Securities Daily and Hong Kong Commercial Daily in the report period. Board chairman:Shang Jianbin Shijiazhuang Baoshi Electronic Glass Co., Ltd. March 28,2009 27 Shijiazhuang Baoshi Electronic Glass Co., Ltd. Auditor’s Report 2008 annual Financial Statements Notes to Financial Statements 28 Auditor's Report Zhong Xi Shen Zi (2009) No. 01120 To all shareholders of Shijiazhuang Baoshi Electronic Glass Co., Ltd.: We audited accompanying financial statements of Shijiazhuang Baoshi Electronic Glass Co., Ltd. (hereinafter referred to as "the Company"), including balance sheet and consolidated balance sheet as at December 31, 2008, profit statement and consolidated profit statement, cash flow statement and consolidated cash flow statement, statement of changes in shareholders' equity and consolidated statement of changes in stockholders equity for the year then ended and the notes to financial statements. I. The responsibility of the management for financial statements Preparation of financial statements in accordance with the Accounting Standards for Business Enterprises is the responsibility of the management of the Company. Such responsibility includes: (1) design, implementation and maintenance of internal control related to the preparation of financial statements so that financial statements are free from material misstatement caused by fraudulent practices or errors; (2) selection and application of proper accounting policies; (3) making reasonable accounting estimate. II. Responsibility of certified public accountants We are responsible for expressing opinions on financial statements based on our audit. We conducted audit in accordance with the audit criteria for Chinese certified public accountants. The audit criteria for Chinese certified public accountants require us to abide by professional ethics, plan and conduct audit to obtain reasonable assurance as to whether financial statements are free from material misstatement. Audit involves carrying out audit procedure to obtain the audit evidences about the amounts and disclosure of financial statements. The selected audit procedure relies on the judgment of certified public accountants, including the appraisal of risk of material misstatement of financial statements caused by fraudulent practices or errors. While appraising risks, we considered the internal control related to the preparation of financial statements to design proper audit procedure but the purpose is not to express an opinion on the effectiveness of internal control. The audit also includes the appraisal of suitability of accounting policies selected by the management, the reasonableness of accounting estimate and the overall presentation of financial statements. We believe that the audit evidences obtained by us are full and appropriate and provide a basis for expressing audit opinion. III. Audit opinion In our opinion, the financial statements of the Company have been prepared in accordance with the provisions of Accounting Standards for Business Enterprises and give a fair view, in all material aspects, of the financial position of the Company as at December 31, 2008 and its operating results and cash flow for the year then ended. Chinese C.P.A.: Wang Aiying Zhongxi Certified Public Accountants Co., Ltd. Chinese C.P.A.: Wang Fang Beijing China March 26,2009 29 Shijiazhuang Baoshi Electronic Glass Co., Ltd. 2008 annual Financial Report Balance Sheet Profit Statement Cash Flow Statement Notes to Financial Statements 30 Balance Sheet Prepared by: Shijiazhuang Baoshi Electronic Glass Co., Ltd. December 31, 2008 Unit：RMB December 31, 2008 December 31, 2007 Items Notes Consolidation Parent Company Consolidation Parent Company Current asset： Monetary fund VII-1 17,507,703.02 17,328,431.91 14,705,272.08 14,385,269.68 Trading financial assets Bills receivable VII-2 1,340,000.00 1,340,000.00 13,595,138.65 13,595,138.65 VII-3,VIII- Account receivable 102,495,580.45 102,495,580.45 110,863,653.40 110,863,653.40 1 Prepaid fund VII-5 968,879.52 968,879.52 8,437,464.16 8,437,464.16 Interest receivable Dividend receivable VII-4,VIII- Other receivable 21,083,142.20 15,604,173.07 19,903,577.19 14,680,876.06 2 Inventories VII-6 45,658,214.55 45,515,089.43 35,911,975.95 35,768,850.83 Non-current asset due in 1 year Other current assets VII-7 58,609,389.92 609,389.92 58,689,946.00 689,946.00 Total of current asset 247,662,909.66 183,861,544.30 262,107,027.43 198,421,198.78 Non-current assets： Disposable financial asset Expired investment in possess Long-term receivable Long-term share equity VII-8,VIII- investment 200,000.00 61,369,306.96 61,169,306.96 3 Property investment Fixed assets VII-9 126,284,555.73 95,373,209.08 140,919,783.70 107,653,859.34 Construction in progress Engineering material Fixed asset disposal Production physical assets Gas & petrol Intangible assets VII-10 12,479,947.12 12,479,947.12 12,811,158.84 12,811,158.84 R & D expense Goodwill Long-term expenses to be VII-11 amortized 7,612,033.09 7,612,033.09 7,723,271.32 7,723,271.32 Differed income tax asset VII-12 12,143,952.61 12,143,952.61 10,890,000.58 10,890,000.58 Other non-current asset Total of non-current asset 158,720,488.55 188,978,448.86 172,344,214.44 200,247,597.04 Total of assets 406,383,398.21 372,839,993.16 434,451,241.87 398,668,795.82 Legal Representative of the Company：Shang Jianbin General manager:Song Hongbo Chief Accountant: Zhou Yumao 31 Balance Sheet（Con） Prepared by: Shijiazhuang Baoshi Electronic Glass Co., Ltd. December 31, 2008 Unit：RMB December 31, 2008 December 31, 2007 Items Notes Consolidation Parent Company Consolidation Parent Company Current liabilities： Short-term loans Trade off financial liabilities VII-1 Bill payable 1,082,099.08 1,082,099.08 89,999.90 50,000.00 4 VII-1 Account payable 21,823,254.90 19,351,301.49 37,695,196.84 35,263,243.33 5 Received in VII-1 6 1,294,842.85 1,294,842.85 1,596,612.48 1,596,612.48 advance Employees’ wage VII-1 6,180,547.46 6,141,118.40 6,920,685.94 6,881,256.88 payable 8 VII-1 Tax payable -579,123.63 941,476.86 -4,779,154.16 -3,399,415.59 9 VII-2 Interest payable 13,491,081.29 13,008,521.43 0 Dividend payable VII-2 Other account payable 24,213,158.91 101,279,989.39 41,028,540.44 116,190,106.55 1 Non-current liability due in 1 year VII-1 Other current liability 68,346,000.00 73,399,226.94 353,226.94 7 Total of current liability 135,851,860.86 130,090,828.07 168,959,629.81 156,935,030.59 Non-current liabilities： Long-term loan Bond payable Long-term payable Special payable Expected liabilities Other non-current VII-1 5,333,494.31 5,356,427.96 liabilities 2 Differed income 165,000.00 165,000.00 Total of non-current 5,498,494.31 165,000.00 5,356,427.96 liabilities Total of liability 141,350,355.17 130,255,828.07 174,316,057.77 156,935,030.59 Owners’ equity VII-1 Share capital 383,000,000.00 383,000,000.00 383,000,000.00 383,000,000.00 9 VII-2 Capital reserves 385,190,502.99 355,857,851.87 385,190,502.62 355,857,851.87 0 Less：Shares in stock VII-2 Surplus reserves 27,454,788.05 32,204,150.60 27,454,788.05 32,204,150.60 1 Common risk provision Undistributed profit VII-2 -546,282,295.83 -528,477,837.38 -550,421,660.64 -529,328,237.24 32 2 Different of foreign currency translation Total of owner’s equity belong to the parent 249,362,995.21 242,584,165.09 245,223,630.03 241,733,765.23 company Minor shareholders’ 15,670,047.83 14,911,554.07 equity Total of owners’ equity 265,033,043.04 242,584,165.09 260,135,184.10 241,733,765.23 Total of liabilities and 406,383,398.21 372,839,993.16 434,451,241.87 398,668,795.82 owners’ equity Legal Representative of the Company：Shang Jianbin General manager:Song Hongbo Chief Accountant: Zhou Yumao Profit statement Prepared by: Shijiazhuang Baoshi Electronic Glass Co., Ltd. January-December 2008 Unit：RMB Report period Same period last year Items Notes Consolidated Parent company Consolidated Parent company I.Income from the key 205,224,991.42 203,343,459.42 228,141,181.38 226,259,649.38 business Incl：Business income VII-28,VIII-4 205,224,991.42 203,343,459.42 228,141,181.38 226,259,649.38 Interest income Insurance fee earned Fee and commission received II.Total business cost 200,047,938.04 202,213,864.75 209,298,146.90 212,014,499.03 Incl：Business cost VII-28,VIII-4 175,356,561.15 176,911,539.37 196,704,307.53 196,375,658.66 Business tax and surcharge VII-29 1,206,623.44 877,974.57 887,202.72 887,202.72 Sales expense VII-30 2,305,340.05 2,305,340.05 854,857.59 854,857.59 Administrative expense VII-30 18,929,825.17 17,738,684.94 20,637,374.43 19,111,275.88 Financial expenses VII-31 -3,576,525.03 664,169.00 -3,961,366.58 658,282.97 Asset impairment loss VII-32 4,271,135.04 5,271,135.04 -5,824,228.79 -5,872,778.79 Add：Gains from change of fir value （“-”for loss） Investment gain （ “-”for VII-33 loss） Incl: investment gains from affiliates Gains from currency exchange（“-”for loss） II. Operational profit 5,177,053.38 1,129,594.67 18,843,034.48 14,245,150.35 （“-”for loss） Add：Non-business VII-34 35,000.00 35,000.00 income Less：Non business VII-35 90,625.10 90,625.10 376,692.84 73,498.38 expenses Incl：Loss from disposal of 33 non-current assets III.Total profit(“-”for 5,121,428.28 1,073,969.57 18,466,341.64 14,171,651.97 loss) Less：Income tax VII-36 223,569.71 223,569.71 7,322,473.86 7,322,473.86 expenses IV. Net profit（“-”for net 4,897,858.57 850,399.86 11,143,867.78 6,849,178.11 loss） Net profit attributable to the owners of parent 4,139,364.81 850,399.86 10,339,042.87 company Minor shareholders’ equity 758,493.76 804,824.91 V. Earnings per share： （I）Basic earnings per 0.01 0.03 0.02 share (II)Diluted earnings per 0.01 0.03 0.02 share Legal Representative of the Company：Shang Jianbin General manager:Song Hongbo Chief Accountant: Zhou Yumao Cash flow statement Prepared by: Shijiazhuang Baoshi Electronic Glass Co., Ltd. January-December 2008 Unit：RMB Report period Same period last year Items Notes Parent Parent Consolidated Consolidated company company I.Cash flows from operating activities Cash received from sales of goods or 242,397,579.47 242,397,579.47 208,697,314.97 208,697,314.97 rending of services Refunded expenses of taxation received Other cash receipts related to operating 七-37 2,211,042.09 1,399,919.45 7,308,712.95 6,694,518.70 activities Subtotal of cash inflow 244,608,621.56 243,797,498.92 216,006,027.92 215,391,833.67 Cash paid for purchasing commodities and 218,157,516.91 218,157,516.91 169,842,600.75 170,358,056.01 accepting labor services Cash paid to and for staff and workers 10,902,467.63 10,902,467.63 11,207,408.75 10,691,953.49 Expenses of taxation paid 8,034,986.69 7,233,011.16 15,181,514.52 14,645,674.44 Other cash payments related to 七-38 4,085,533.39 3,935,654.99 6,706,837.68 6,574,625.95 operating activities Subtotal of cash outflow 241,180,504.62 240,228,650.69 202,938,361.70 202,270,309.89 Net cash flow from operating activities 3,428,116.94 3,568,848.23 13,067,666.22 13,121,523.78 II. Cash flow from investing activities: Cash received from investment recovery Cash received from obtaining investment income Net cash received from the disposal of fixed assets, intangible assets and other 25,200.00 25,200.00 long-term assets Net cash recived from subsidiaries and 34 other operational units Other cash receipts related to investing activities Subtotal of cash inflow 25,200.00 25,200.00 Cash paid for constructing or purchasing fixed assets, intangible assets 425,686.00 425,686.00 169,000.00 169,000.00 and other long-term assets Cash paid for investment 200,000.00 200,000.00 Net cash received from subsidiaries and other operational units Other cash payment related to investing activities Subtotal of cash outflow 625,686.00 625,686.00 169,000.00 169,000.00 Net cash flow from investing activities -625,686.00 -625,686.00 -143,800.00 -143,800.00 III. Net cash flow from financing activities: Cash received from absorption of investment Cash received from loans Other cash receipts from financing activities Subtotal of cash inflow Cash paid for debt repayment Cash paid for distribution of dividends or profits or interest reimbursement Other cash payment related to financing activities Subtotal of cash outflow Net cash flow from financing activities IV. Influence of the change in exchange rate on cash V. Net increase of cash and cash equivalents 2,802,430.94 2,943,162.23 12,923,866.22 12,977,723.78 Add：Balance of cash and cash 14,705,272.08 14,385,269.68 1,781,405.86 1,407,545.90 equivalents at the period -begin VI. balance of cash and cash equivalents at 17,507,703.02 17,328,431.91 14,705,272.08 14,385,269.68 the period-end. Legal Representative of the Company：Shang Jianbin General manager:Song Hongbo Chief Accountant: Zhou Yumao 35 Consolidation Statement on Change in Owners’ Equity Prepared by: Shijiazhuang Baoshi Electronic Glass Co., Ltd. Year 2008 Amount of the Current term Owner’s equity Attributable to the Parent Company Items Share Capital Capital reserves Surplus reserves Attributab I.Balance at the end of last year 383,000,000.00 385,190,502.62 27,454,788.05 -550,42 Add: Change of accounting policy Correcting of previous errors Other 383,000,000.00 385,190,502.62 27,454,788.05 -550,42 II.Balance at the beginning of current year 4,13 III.Changed in the current year 4,13 （I） Net profit （II） Gains losses accounted into owners’ equity directly 1．Change in fair value of sellable financial assets, net 2．Influence of change in other owners’ equity of invested enterprises on equity basis 3．Influence of income tax related to owners’ equity items 4．Other 4,13 Total of (I) and (II) （III）Investment or decreasing of capital by owners 1.Investment by owners 2．Amount of shares paid and accounted as owners’ equity 3．Other （IV）Profit allotment 1．Providing of surplus reserves 7 2.Providing of common risk provisions 3．Allotment to the owners(or shareholders) 4．Other （V）Internal transferring of owners’ equity 1．Capitalizing of capital reserves（Or to capital ） 2．Capitalizing of surplus reserves （Or to capital shares） 3．Making up losses by surplus reserves 4．Other 383,000,000.00 385,190,502.62 27,454,788.05 -546,28 IV.. Balance at the end of this term Legal Representative of the Company：Shang Jianbin General manager:Song Hongbo Chief Accountant: Zhou Consolidation Statement on Change in Owners’ Equity（Con） Prepared by: Shijiazhuang Baoshi Electronic Glass Co., Ltd. Year 2008 Amount of the previous ter Owner’s equity Attributable to the Parent Company Items Share Capital Capital reserves Surplus reserves Attributable I.Balance at the end of last year 383,000,000.00 550,253,744.43 27,454,788.05 -760,504, Add: Change of accounting policy -165,063,241.81 199,744, Correcting of previous errors Other 383,000,000.00 385,190,502.62 27,454,788.05 -560,760, II.Balance at the beginning of current year 10,339, III.Changed in the current year 10,339, （I） Net profit （II） Gains losses accounted into owners’ equity directly 1．Change in fair value of sellable financial assets, net 8 2．Influence of change in other owners’ equity of invested enterprises on equity basis 3．Influence of income tax related to owners’ equity items 4．Other 10,339, Total of (I) and (II) （III）Investment or decreasing of capital by owners 1.Investment by owners 2．Amount of shares paid and accounted as owners’ equity 3．Other （IV）Profit allotment 1．Providing of surplus reserves 2.Providing of common risk provisions 3．Allotment to the owners(or shareholders) 4．Other （V）Internal transferring of owners’ equity 1．Capitalizing of capital reserves（Or to capital ） 2．Capitalizing of surplus reserves （Or to capital shares） 3．Making up losses by surplus reserves 4．Other 383,000,000.00 385,190,502.62 27,454,788.05 -550,421, IV.. Balance at the end of this term Legal Representative of the Company：Shang Jianbin General manager:Song Hongbo Chief Accountant: Zhou Yuma Parent company Statement on Change in Owners’ Equity Prepared by: Shijiazhuang Baoshi Electronic Glass Co., Ltd. Year 2008 Un Items Amount of the Current term Owner’s equity Attributable to the Parent Company 9 Share Capital Capital reserves Surplus reserves Attr I.Balance at the end of last year 383,000,000.00 355,857,851.87 32,204,150.60 -5 Add: Change of accounting policy Correcting of previous errors Other 383,000,000.00 355,857,851.87 32,204,150.60 -5 II.Balance at the beginning of current year III.Changed in the current year （I） Net profit （II） Gains losses accounted into owners’ equity directly 1．Change in fair value of sellable financial assets, net 2．Influence of change in other owners’ equity of invested enterprises on equity basis 3．Influence of income tax related to owners’ equity items 4．Other Total of (I) and (II) （III）Investment or decreasing of capital by owners 1.Investment by owners 2．Amount of shares paid and accounted as owners’ equity 3．Other （IV）Profit allotment 1．Providing of surplus reserves 2.Providing of common risk provisions 3．Allotment to the owners(or shareholders) 4．Other （V）Internal transferring of owners’ equity 1．Capitalizing of capital reserves（Or to capital ） 2．Capitalizing of surplus reserves （Or to capital 10 shares） 3．Making up losses by surplus reserves 4．Other 383,000,000.00 355,857,851.87 32,204,150.60 -5 IV.. Balance at the end of this term Legal Representative of the Company：Shang Jianbin General manager:Song Hongbo Chief Accountant: Zhou Y Parent company Statement on Change in Owners’ Equity Prepared by: Shijiazhuang Baoshi Electronic Glass Co., Ltd. Year 2008 Amount of the previous term Items Owner’s equity Attributable to the Parent Company Share Capital Capital reserves Surplus reserves Attr I.Balance at the end of last year 383,000,000.00 550,253,744.43 27,454,788.05 -7 Add: Change of accounting policy -194,395,892.56 4,749,362.55 2 Correcting of previous errors Other 383,000,000.00 355,857,851.87 32,204,150.60 -5 II.Balance at the beginning of current year III.Changed in the current year （I） Net profit （II） Gains losses accounted into owners’ equity directly 1．Change in fair value of sellable financial assets, net 2．Influence of change in other owners’ equity of invested enterprises on equity basis 3．Influence of income tax related to owners’ equity items 4．Other Total of (I) and (II) （III）Investment or decreasing of capital by owners 11 1.Investment by owners 2．Amount of shares paid and accounted as owners’ equity 3．Other （IV）Profit allotment 1．Providing of surplus reserves 2.Providing of common risk provisions 3．Allotment to the owners(or shareholders) 4．Other （V）Internal transferring of owners’ equity 1．Capitalizing of capital reserves（Or to capital ） 2．Capitalizing of surplus reserves （Or to capital shares） 3．Making up losses by surplus reserves 4．Other 383,000,000.00 355,857,851.87 32,204,150.60 -5 IV.. Balance at the end of this term Legal Representative of the Company：Shang Jianbin General manager:Song Hongbo Chief Accountant: Zhou Yumao 12 Shijiazhuang Baoshi Electronic Glass Co., Ltd. Notes to financial statements As of December 31,2008 (Referring to notes to consolidated financial statements unless separately stated. Currency: RMB) I.Brief introduction of the Company： Shijiazhuang Baoshi Electronic Glass Co., Ltd.(Hereinafter referred to as “ The Company”)is a company listed with Shenzhen stock Exchange which issued domestically listed ordinary shares (A shares) and domestically listed foreign-capital shares (B shares). The approved business scope of the Company is the manufacturing and sales of kinescope bulb and kinescope for black-and –white TV.Due to the abrupt change of domestic TV market in 1997, the Company’s production line producing kinescope bulb and kinescope for black –and-white TV stopped production from June 1997. The Company held provisional general meeting on March 30, 2000. The meeting passed the resolution for selling this production line to its controlling shareholder Shijiazhuang Baoshi Electronic Group CO., Ltd.(the Controllin Co.) to exchange it for the componentfactory of the Controlling Co. engaged in the production of kinescope part of color TV. From then on, the main operating activities of the Company were the production and sales of pins and anode caps used for kinescope bulb for color TV. As adopted by annual shareholders’general meeting , the Company’s business scope was extended to include the export of self-made products and the import of mechanical equipment, parts and components, raw and auxiliary materials needed by the Company in addition to the original dealing in electro-vacuum glass devices and supporting electronic components. The subsidiary whose shares controlled by the Company (with the Company collectively called ‘the Group’) Shijiazhuang Baoshi Colour bulbs Co., Ltd (hereinafter referred to as ‘Color bulbs’), on July 3, 1997, jointly invested and established Shijiazhuang Baoshi Electric Nitrate & Glass Co., Ltd (hereinafter referred to as Pin Co.) with Japan Electric Pin Company and the Japan IWAI Corporation to set up a venture in S The yield Glass Limited. Color Shell owned 49% equity of Nitrate Co. The main business of Nitrate Co. is production and sales of the glass shell of picture tube for color TV. On November 30 ,2006, Color bulbs transferred all his equity in Pin Co. to Shijiazhuang Baoshi Electronics Group Co., Ltd. II. Influences from the change of important accounting policies of the company: No 1 III. Statement on complying with enterprise accounting standards The Company state: the financial statements prepared are in line with the requirements in enterprise accounting standards in line with of system, and have truly and completely reflected of the financial status, operational results, cash flow, and other relevant information. IV.Accounting policies, accounting estimation and the method of preparing consolidatedfinancial statements： (1) Basis for preparing financial statements： The accounting statement was compiled in accordance with the Corporate Accounting Standards and its application guidelines released by the state Ministry of Finance on February 15, 2006. (2) Accounting year: from January 1 to December 31 as one accounting year. (3) Standard currency for bookkeeping：The Company takes RMB as the standard currency for bookkeeping. (4) Book keeping basis and pricing principle. The Company tqakes the accrual system as the basis for book keeping. Accounting factors are usually measured by historical cost, using the replacement costs, the realizable net value, the present value, the fair value to measure, to ensure that the amount of accounting factors can be obtained and measured. (5)Foreign currency translation Transactions denominated in foreign currencies are translatedf into RMB at the applicable basic ratesof exchange quoted by the People’s Bank of China ( “PBOC”) prevailing at the dates of the transaction. The foreign currency accounts on the balance sheet date were converted to RMB according to the median price of the RMB exchange rate on that date announced by the People's Bank. The exchange differences were accounted to gains or losses of the current period besides the exchange losses or gains from special funds and interests in the period of construction of fixed assets that were accounted to the long-term unamortized expenses. (6)Cash and cash equivalents The cash stated in cash flow statement refers to cash in hand and bank deposits usable for payment at any time. Cash equivalent refers to the investments with holding period of less than three months that are readily convertible to known amouunt of cash and subject to insignificant risk of changes in value. (7). Accounting method of financial instruments (1). Classification of initial confirmation of financial assets and financial liabilities. Financial assets can be divided into four categories at the initial recognition,: 2 1). The financial assets measured by fair value and their changes are included in the gains and losses in the current period, including transactional financial assets and the financial assets measured by fair value and their changes are included in the gains and losses in the current period; 2). The expiry investments held; 3). Loans and receivables; 4). Financial assets available for sale. Financial liabilities can be divided into two categories at the initial recognition: 1). The financial liabilities measured by fair value and their changes are included in the gains and losses in the current period, including transactional financial liabilities and the financial liabilities measured by fair value and their changes are included in the gains and losses in the current period; 2) Other financial liabilities. (2). The follow-up measurement of financial assets and financial instruments follows the relevant provisions in Accounting Standards for Business Enterprises No. 22 - Recognition and Measurement of Financial Instruments, and Accounting Standards for Business Enterprises No. 23. (8) Accounts receivable and provision for bed debts Accounts receivable include the accounts receivable and other receivable . The Group had adopted allowance accounting method to account the possible bad debts losses. method. The account Receivable was the net value of the actual amount minus the bad debt reserve. (a）Accounts receivable Accounts receivable include the accounts receivable from related parties and non-related parties. For the related accounts receivable, the receivability, the other accounts receivable and the non-related account receivable that exists evident differences, the Group adopts the method of individual identifying to account the special bad debt reserve. (b)Other receivables For the accounts of other receivable, the Group uses the method of individual identifying to account the special bad debts reserve. (c) Recognition standards for bad Debt losses. For the receivables that can not be repaid with evidence are recognized as bad debts, offsetting the bad debt reserve accounted. (9) Inventories Inventories including raw materials, products in production, Low-value consumable goods, goods in stock, spare parts, are listed depending on which is lower between cost and net value realizable. 3 For stock releasing, accounts by month-end weighted average method. For the consuming of Consumable Goods of Low Value, uses once conversion method to account the cost. For the consuming of packaging materials, accounts it to the cost at one time. For the cost of finished products and products in production including the raw materials, direct labor, all indirect production costs under normal production capacity, and the conversion of the cost of inventory sold, accounts by month-end weighted average method. For inventory at period end, accounts the inventory price falling reserve according to the difference between the cost of individual inventory project and the net value realizable. For the inventories that have similar purposes and relate to the products in the same region, and in fact, are difficult to distinguish the serial products from other items, collectively account the price falling reserve; For inventories that have large quantity but low in price, account the price falling reserve according to stock categories. For the net value realizable in accordance with the normal production process, determine the amount by the estimated stock price minus the estimated cost, cost of sales and related taxes. (10) Long-term equity investment Long-term equity investments includes the equity investment on subsidiaries, consolidated enterprises and joint enterprises and other equity investments prepared to hold more than one year. (1) Initial measures: (i) For the long-term equity investments formed by the merger of enterprises, determines its initial investment costs in accordance with the following provisions: For the corporate merger under the same control, the merging parties paying by cash, transfer of non-cash assets, or the means of debt bearing as the merger price. The merger should be made in accordance with the combined book value of the owner's equity share of the equity investment as a long-term investment in the initial cost, long-term equity investment initial investment costs the cash payment, transfer of the non-cash assets and the assumption of debt by book value to the difference between the adjusted capital surplus; for surplus less than the offset capital, adjusts the retained earnings; for the merging parties with the issuance of securities as interest on the price of the merger, the merger should be made in accordance with the merging parties the rights of owners book value of equity shares as a long-term investment in the initial cost of the investment. In accordance with the issued shares and total value of equity, long-term equity investments and the cost of initial investment by issuing shares of a face value of the difference between the amount should be adjusted capital surplus; for Less capital surplus, adjusts the retained earnings. Long-term equity investment formed by the merger of enterprises under different control, determine the initial cost of long-term equity investment according to the cost of enterprise merger at the date of purchase. (ii) Besides the long-term equity investment obtained by the other way of the merger, determine the initial investment cost in accordance with the following provisions: For the long-term equity investment obtained by cash, determine the initial investment cost in accordance with the actual payment of the purchase price. Initial investment costs include the costs, taxes and other necessary expenses directly related to the obtaining of long-term equity investment; For the long-term equity investment obtained by the issuance of equity securities, determine the initial investment cost in accordance with the fair value of the equity securities issued. For the long-term equity investment invested by investors, determine the initial investment cost in accordance with value in the investment contract or agreement, besides the contract or agreement regulates the value can not 4 be the fair value. For the long-term equity investments obtained through the exchange of non-monetary assets, determine the initial investment costs in accordance with the Enterprise Accounting Standards No. 7--non-monetary exchange of assets. For the long-term equity investments obtained through debt restructuring, determine initial investment costs in accordance with the Enterprise Accounting Standards No. 12--Debt Restructuring. (2) Follow-up measurement: (i)For the long-term equity investments that do not have joint control or significant influence on subsidiaries, have no market quotations, the and the fair value can not be reliably measured, accounts by the cost method.. For the cash dividend or profit declared by the units invested, recognizes it as current investment income. Confirmation of investment income is restricted to cumulative net profit of sub-quotas after units invested receiving the investments. For the part that surpass the above amount, recovers it as the initial investment cost. (ii) For the long-term equity investments that have joint control or significant influence on the units invested, accounts it by the method of equity. Upon the acquiring of the long-term equity investment, based on the fair assets value recognized by the units invested, confirm the investment losses or gains and adjust the account value of long-term equity investment after adjusting the net losses and gains achieved by the units invested. The owning part of the profit and cash dividends declared by the units invested, correspondingly reduce the book value of the long-term equity investment. For the other changes in the rights of the owners apart from the net gains and losses of the units invested, adjusts the book value of the long-term equity investments and recognizes it as capital surplus. Adjust the book value of long-term equity investment and include it in owner's equity. On the date of balance sheet, accounts it according to which is lower between the book value of long-term equity investments and the amount recoverable, if the amount recoverable is lower than the book value, accounts the assets devaluation preparations and confirms the devaluation losses. The Company adopts the method of accounting long-term equity investment term by term, once the devaluation preparation is confirmed, it shall not be converted back in the accounting period in the future. For the long-term investments that have market price, judge and account the devaluation preparations according to the following situations: The market price lower than the book value in continuous two years; The investment is suspended for one year or more; The units invested have serious losses in that year; The units invested have losses in continuous two years; The units invested have rectification, liquidation and other signs of unsustainable business. For the long-term investments without market price, judge and account the devaluation preparations in accordance with the following signs: The changes in political or legal environment like the issuance or rectification of tax lows and trading lows that affect the operation of the units invested, may result in the huge losses in the units invested. The changes in market demands due to the goods or labor provided by the units invested are obsolete or due to consumers’ preferences change, resulted in serious influences in the financial situation in the units invested; The production technologies in the industries of the units invested have significant changes, the units invested have lost their competitive capacity, thus leading to serious financial situations, for example: rectification, liquidation etc; The other situations that there is evidence to show the investment will not actually bring economic interests for the Group Standards for fixed assets: the assets held for the purpose of goods production, labor providing, rent or management; the service life more than one year; the tangible assets with high unit value. (11) The fixed assets depreciation: (1) Economic benefits related to the fixed assets may flow to the enterprise; (2) The cost of the fixed assets can be reliably measured. Initial measurement of fixed assets: account the value of the fixed assets in accordance with the actual cost of construction & purchase of them. 5 The follow-up expenditures related to fixed assets, for the ones that meet the conditions of fixed assets confirmation, should be included in the cost of fixed assets; For the ones that do not meet the conditions of fixed assets recognition, should be included in the current gains and losses. For the follow-up expenditures on fixed assets, should be included in the cost of fixed assets, and should terminate the book value of fixed assets that was replaced. The enterprise should account depreciation for all fixed Assets. But except the fixed assets that had accounted adequate depreciation but continued to use and the land separately accounted. Depreciation Method: for depreciation of fixed assets, uses the straight-line method, accounting by the recorded value minus the estimated residual net value in the expected life period. Determine the depreciation rate according to the categories of fixed assets, expected life span and the expected rate of net residuals, as follows : Estimated useful Estimated residual value Depreciation Lif t t (%) Houses and 4.62～4.85 20～21 3 Buildings Machinery and 11～12 3 8.08～8.82 Equipemnt Means of 11～12 3 8.08～8.82 transportation Other Equipment 11～12 3 8.08～8.82 At the end of each year, the Group checks the fixed assets item by item. If recoverable amount is below the book value because the steady fall of the market price, or technological obsolescence, damage or long-term idleness or other factors, them make the difference between the recoverable amount and the book value as the reserve for fixed assets devaluation, which was accounted as the individual assets. If the fixed assets of the company actually have had losses, then account the devaluation reserve. When one of the following circumstances exists, completely account the reserve for fixed assets devaluation in accordance with the full book value of fixed assets: The fixed assets that being put aside in long term, or no longer be used in the foreseeable future, and have no value of transfer; Due to technological advances and other factors, the fixed assets can not be used; Although the fixed assets can be used, but if use, large quantity of unqualified products may produce; The fixed assets that had been damaged, and there is no usage value or value of transfer; Other fixed assets that cannot bring economic benefits for the Group. Upon the recognition of the fixed assets devaluation losses, depreciation or amortization expenses of the devalued assets should have correspondent adjustment in the future periods, so that in the remaining service life of the assets, systematically adjust the book value of the assets (excluding the predicted net residuals). Upon the recognition of the fixed assets devaluation losses, in the subsequent accounting period they shall not be converted back. Costs of the project include the construction costs, and other direct costs, original price cost and installation cost of the equipment, and the loan expenses from the loan for purchase of fixed assets for the construction project. The construction project reached the predicted purpose and was transferred to the fixed assets state, and started to account depreciation from the second month. The Group conducts overall inspection to the construction projects at the end of each year, if there is evidence to show that the construction projects have already devaluated, devaluation reserves should be accounted. If there is one or more of the following circumstances, devaluation reserves for construction projects should be accounted: (12) Construction-in -progress Construction in progress represents capital asets under construction or instrallation and is stated at actual cost. The projects that had long been stopped or the projects that will not restarted in three years.; The projects that was lagged behind in both performance and in technique, and that may bring 6 great uncertainty for the economic benefits of the Group. Other situations that can prove that depreciation has already occurred to the construction projects. Once the devaluation losses of the construction projects are confirmed, they shall be converted back in subsequent accounting period. (13)Intangible assets For intangible assets, including patents, generic technology, trademark, copyright, land-use right, permit right, etc, are listed by the net value that cost minus accumulated amortization and accumulated devaluation. The amount of amortization of intangible assets should be systematically amortized within the service life. Amortization method should reflect the economic profit and the expected achievement methods related to the intangible assets. If unable to determine the expected achievement methods, adopt the method of straight line to amortize. For the intangible assets that can not confirm the service life, do not amortize. For the right of land use, the actual payment of the purchase price is the actual cost, accounting the intangible assets before the construction of the project, and using method of straight line to amortize according to the land use period. Use the straight-line method and amortize it in 50 year. For the expenditures on internal research & development projects, the company pays the expenses according to the research phase and development phase. The expenditures in the research phase are included in current profit and loss; For the expenditures that meet the conditions in the development phase, shall be capitalized and recognized as intangible assets. At the end of each year, the Group checks the capability of all intangible assets that is expected to bring economic benefits for the Group in the future. For the expected recoverable amount below its book value, account the reserves for devaluation. For the intangible assets, account the reserves for devaluation according to the individual item. When there is one or more of the following cases, the book value of intangible assets shall be completely converted to the current profit and loss: The intangible asset that have been replaced by some other new technology, and it had no use value and transfer value; The intangible assets the has exceeded the legal time limit, and it can not bring economic benefits for the Group; Other cases that can prove the intangible asset had lost its use value and transfer value. When there is one or more of the following circumstances, account the devaluation reserves for the intangible assets: The intangible assets that have been replaced by other new technologies, and that makes it produce great adverse affect to economic interests of the Group. The market value of certain intangible assets had a sharp decline in the current period, and will no resume in the remaining amortization period; The intangible assets the has exceeded the legal time limit, but they still have some value; Other cases that can prove the intangible assets have had devaluations. Once the devaluation losses of the intangible assets have been recognized, they can not be converted back in the subsequent accounting period. (14) Long-term amortization expenses. If the long-term amortization expenses are precious metals, amortize according to the actual damage degree of the precious metals, and listed by the net amount of actual expenditure minus the accumulated amortization. (15) Loan expenses. (1) Recognition principles for the capitalization of loan expenses. Loan expenses include the interest on borrowings, the amortization of premium or discount, support expenses 7 and the exchange differences from foreign currency loans etc. For the loan expenses, if can be directly attributed to the capital, account them into the capital costs; For the other loan expenses, account them into the losses and gains in the current period according to the occurrence amount. If the loan expenses meet the all following conditions in the same time, they shall be capitalized and included into the cost of that assets : ① Assets expenditure has occurred; ② The loan costs have occurred; ③ The necessary construction or production activities for the assets to achieve the predicted state. The loans include the specialized loan and the general loan. (2) For the additional expenses from specialized loan, before the achieving of the expected use or sale state and meet the capitalized condition, according to the occurance amount to have capitalization, and account it into the capital cost that meet the capitalization condition; after the achieving of the expected use or sale state and meet the capitalized conditions, according to the occurance amount to recognize as cost, and account it into the current losses and gains. For the additional expenses from general loans, recognize the occurance amount as the expenses, and account it into the current losses and gains. (2) Calculation method for loan expenses capitalization. For the special loan for the construction and production of capitalized assets, the actual interest expense from special loan minus the interest income from loan deposited in the bank or the amount of investment gains from temporary investment. For the general loan for the construction and production of capitalized assets, according to the capital expense weighted average amount of the cumulative capital expenditure multiply the capitalization rate of the general loan occupied, account interest amount of the general loan capitalization. The capitalization rate is accounted according to the general loan weighted average interest rate. (16) Social security of staff and workers The Group participates in social security sysem for staff and owrkers establishedbygovernmental agencies according to relevant regulations, including endowment insurance, public accurnulation fund for housing construction and others. Except the above –mentioned, the Company did not make other important commitment in respect of welfare of staff and workers The Group allocates for insurance premium and common reserve fund according to certainproportion of total payroll under the premise of not exceeding the specified top limit and make payment to labor and social security organ in accordance with relevant regulations. Corresponding expenditure is included in current production costs or expenses. (17) )Income recognition Sales of products： The risks and rewards on goods ownership are transferred to the buyers. The company will no longer implement the right of management and the right of actual control. The amount of income can be reliably accounted. The economic interest related to transactions flows into the Group and the cost related to the sale of the goods, the realization of business income confirmed. (18 )Income recognition Sales of products： The risks and rewards on goods ownership are transferred to the buyers. The company will no longer implement the right of management and the right of actual control. The amount of income can be reliably accounted. The economic interest related to transactions flows into the Group and the cost related to the sale of the goods, the realization of business income confirmed. Provision of balor services： The operating income from the labor services started and finished within the samefiscalyear is 8 recognized when the labor services are finished. The income from labor services that are started and completed in different years is recognized with completion percentage method on the date of balance sheet where the result of provision of labor services can be reliably estimated. Transferring the use right of the assets: The related economic interests are likely to flow into the enterprise, and the amount of the revenue can be reliably measured, confirm it as income. For the income from use fee, account it according to the charge time and method agreed in the contract or the agreement. Other income is recognized on the following basis： The interest income is recognized according to the time proportion of deposit periodandeffective yield . Operating lease income is confirmed by straight-line method within the lease term. Provision of balor services： The operating income from the labor services started and finished within the samefiscalyear is recognized when the labor services are finished. The income from labor services that are started and completed in different years is recognized with completion percentage method on the date of balance sheet where the result of provision of labor services can be reliably estimated. Transferring the use right of the assets: The related economic interests are likely to flow into the enterprise, and the amount of the revenue can be reliably measured, confirm it as income. For the income from use fee, account it according to the charge time and method agreed in the contract or the agreement. Other income is recognized on the following basis： The interest income is recognized according to the time proportion of deposit periodandeffective yield . Operating lease income is confirmed by straight-line method within the lease term. (18)Accounting process of income tax The unpaid income taxes in the current and prior period shall be confirmed as liabilities. And the over paid income tax shall be confirmed as assets. Upon the acquisition of the assets and liabilities, tax accounting basis shall be confirmed. If there are differences between the account value of the assets and liabilities and the tax accounting basis, the deferred income tax assets or deferred income tax liabilities shall be confirmed according to the relevant regulations. (19) Method of preparing consolidated financial statements The Group compiles the consolidated accounting statements according to Finance Ministry Accounting word [2006] the 3rd Enterprise Accounting Standards No. 33 – regulations for consolidating financial statements. 9 The Company starts to consolidate the income , cost and profit of subsidiaries for corresponding period from the date of obtaining the actual control of subsidiaries and stops the consolidation from the date of losing actual control. All material balances of current accounts, transactions and unrealized profits between the Company and the subsidiaries have been eliminated on consolidation. For the minority shareholders’ equity that belongs to the equity of the subsidiary but does not belong to the Group is listed with the item of ‘minority shareholders equity’. For the minority shareholders equity in the current net gains and losses shall be listed the in item ‘minority shareholders equity’ under the item of net profit in the integrated profit sheet. V. Taxation Tax rate Tax base VAT 17% Product sales revenue. VAT 13% Sales revenue of energy and power Business tax 3～5% Income from labor services and lease. City construction tax 7% Turnover tax to be paid allowances. Surcherge for education 4% Turnover tax to be paid allowances. Enterprise income tax 25% Taxable income VI. .Controlled subsidiaries and associated companies Proportion(%) Whe Amount Minority Full name Registered ther of interests ofthe Registra Busines capital Or Business investmen 2008.12.31 investmen tion s Indir not （RMB’0 scope t made by directly t plane nature ect （RMB’0000 cons 000） the company ） olida company ted Shijiazhu No.9, Manufa 54,068 Production 43,934 81.26 1,567 Yes ang Huangh cturing and sales % Baoshi e Road, Industr of glass Color Shijiazh y bulbs for bulb Co., uang colour Ltd. kinescope and electronic glass products VII. Notes to main iterms of Consolidation financial statements(Unit:RMB) 1. Monetary capital December 31, 2008 December 31, 2007 Cash 77,613.72 83,483.36 Bank deposit 16,397,990.22 14,621,788.72 10 Other currency capital 1,032,099.08 - Total 17,507,703.02 14,705,272.08 Note：The other monetary capital was the margin for the notes payable. Bill receivable 2．Bill receivable December 31, 2008 December 31, 2007 Trade acceptance 1,340,000.00 6,340,125.17 Bank acceptance - 7,255,013.48 Total 1,340,000.00 13,595,138.65 Note: Bill receivable balance for 2008 term end has decreased RMB12.2551 million yuan compare with 2007 term end balance， decreasing amplitude is 90.14%， due to the change from power business to enterprise， large bill receivable has decreased. The paid but undue bills Issue unit/Endorsing Units End of balance Issue date Mature date Bank acceptance CITIC Electrical 2008-10-10 2009-4-10 30,000.00 Hubei Jinhuan Holding Bank acceptance 2008-10-16 2009-4-16 Company 10,000.00 Bank acceptance Tangshan Pengrun Guomei 2008-11-27 2009-5-27 100,000.00 Sihong Shuanggou Town Jiale Bank acceptance 100,000.00 2008-11-27 2009-5-27 Home Appliances Fengguang Haochen Bank acceptance 100,000.00 2008-11-28 2009-5-25 Economic and trade Shichuan Meishan Shenzhou Bank acceptance 100,000.00 2008-10-28 2009-4-26 Electric Chengdu Shuangmai Gold Bank acceptance 2008-10-13 2009-4-13 Co., Ltd. 100,000.00 Henan Shunda Chemical Bank acceptance 100,000.00 2008-10-13 2009-4-13 Technology hengdu Shuangmai Gold Co., Bank acceptance 2008-10-13 2009-4-13 Ltd. 100,000.00 Bank acceptance Qiannanzhou Ruixing Electric 2008-10-13 2009-4-18 100,000.00 Bank acceptance Taizhou South Machine tool 2008-9-12 2009-3-12 100,000.00 Beijing Shoujian Hengji Bank acceptance 2008-9-12 2009-3-12 Construction 100,000.00 Total 1,040,000.00 3.Account receivable 1）Type Analyse: Balance in year-end Balance in year-begin 11 Bad debt Bad debt Amount Proportion(%) Amount Proportion(%) reserve reserve Significant account receivable of 104,070,137.00 76.45 8,041,810.32 106,640,555.26 75.48 8,041,810.32 single amount The receivables that the individual amount is not large but the risk is 25,594,483.48 18.80 25,594,483.48 25,853,779.54 18.30 22,369,604.50 great Other unsignificant of account 6,467,253.77 4.75 8,780,733.42 6.22 receivable - - Total 136,131,874.25 100.00 33,636,293.80 141,275,068.22 100.00 30,411,414.82 Note：Class standard of account recivable： ①The receivables of large amount: The receivables that rank at top five and the total amounts account for 10% or more; ②The receivables that the individual amount is not large but the risk is great and the period more than 3 years; ③Other receivables which are not significant: the receivables besides ①, ②. ④The other monetary fund was the margin for the notes payable. The method for the accounting of provision for bad debts of the company is individual confirmation, provisions for bad debts were accounted on the receivables for more than three years and other receivables may not be recovered. （2）The age of acounts analyzed Balance in year-end Balance in year-begin Proporti Proportio Amount Bad debt reserve Amount Bad debt reserve on(%) n(%) 102,454,908.45 75.26 0.00 104,971,055.77 74.30 - Within 1 year 24,000.00 0.02 0.00 3,796,390.00 2.69 759,278.00 1-2 years 2-3 years 3,796,390.00 2.79 3,796,390.00 6,567,809.32 4.65 3,714,040.00 29,856,575.80 21.93 29,839,903.80 25,939,813.13 18.36 25,938,096.82 Over 3 years Total 136,131,874.25 100.00 33,636,293.80 141,275,068.22 100 30,411,414.82 Note： The receivable balance on December 31, 2008 decrease RMB 5.1432 million than that at the end of 2007, the decrease rate 3.64%. Description of provision for bad debts written off and charged off in this year (3)The top five accounts receivable at period end accumulated a loan of RMB 126.2454 million in total, the ratio representing the total value of accounts receivable at period end was 92.74%. （4）There were no important accounts receivable from the main shareholders of the Company holding nore than 5% (including 5%) of the total shares of the Company. （5）The balance at the period end of the receivables of related parties is RMB 92.2783 million, 12 accounting for 67.78% of the balance of accounts receivable at the period end. (6) The top 5 in accounts receivable Balance at the period end. Age Proportion% Shijiazhuang Baoshi Electrinic vacuum Glass Co., Ltd. 92,092,228.93 Within 1 year 67.65% Baoshi TV Factory 14,009,355.59 Over 3 years 10.29% Henan Ancai Gaoke Co., Ltd. 8,305,655.87 Within 1 year 6.10% Tianjing Anjing Electrinic 8,041,810.32 Glass Co., Ltd. Over 3 years 5.91% Anyang Xinyi Electrinic GlassCo., Ltd. 3,796,390.00 2-3 years 2.79% Total 126,245,440.71 92.74% （7）The accounts receivable that impairment was tested separately Balance at the Provision for b Ratio Reasong for the accounting period end. ad debts accoun ted(%) Tianjing Anjing Electrinic Glass Stopped and had no ability 8,041,810.32 8,041,810.32 100.00 Co., Ltd. to repay Anyang Xinyi Electrinic Glass Co., The group belonging to is 3,796,390.00 3,796,390.00 100.00 Ltd. bankrupting The loan units cannot be Shenzhen Dimotai Industry 56,244.44 56,244.44 100.00 contacted. Account age exceeds 3 Tianjing Jingjing Glass Co.,Ltd. 266,960.00 266,960.00 100.00 years and has no sign to repay The loan units cannot be Jiangshu Chemical 27,435.00 27,435.00 100.00 contacted. Stopped and had no ability Baoshi Trade Company 269,792.40 269,792.40 100.00 to repay Stopped and had no ability Baoshi Process Factory 921,915.24 921,915.24 100.00 to repay The loan units cannot be Anyang Radio tube Factory 68,486.00 68,486.00 100.00 contacted. Account age exceeds 3 Fuyang Baoshi 186,050.75 186,050.75 100.00 years and has no sign to repay Shijiazhuang Radio and TV The loan units cannot be 483,604.75 483,604.75 100.00 Company. Economic Department contacted. The loan units cannot be Nanning Wireless No.3 Factory 1,061,353.90 1,061,353.90 100.00 contacted. Baoshi TV Factory 14,009,355.59 14,009,355.59 100.00 Bankrupting Tianjing Communication Tadio The loan units cannot be 570,000.00 570,000.00 100.00 Company contacted. The loan units cannot be Anyang Dali Electrinic Company 45,006.00 45,006.00 100.00 contacted. The loan units cannot be Shanxi Huguan Chemical station 101,200.00 101,200.00 100.00 contacted. The loan units cannot be Shanxi Chengzhi Chemical station 20,840.00 20,840.00 100.00 contacted. Shixinsheng Industry Company 27,050.00 27,050.00 100.00 The loan units cannot be 13 contacted. The loan units cannot be Jingjing Sale Building 12,600.00 12,600.00 100.00 contacted. Account age exceeds 3 Zhang Jinjiang 42,500.00 42,500.00 100.00 years and has no sign to repay Account age exceeds 3 Shilichao Trade Company 1,001,600.00 1,001,600.00 100.00 years and has no sign to repay The loan units cannot be Xinxiang Industry and trade 36,960.00 36,960.00 100.00 contacted. The loan units cannot be Shunping Home Appliances 74,070.00 74,070.00 100.00 contacted. The loan units cannot be Wuji Home Appliances 2,500.00 2,500.00 100.00 contacted. Xinle People Security The loan units cannot be 33,600.00 33,600.00 100.00 Dept contacted. Account age exceeds 3 Shi Zhenghong 10,000.00 10,000.00 100.00 years and has no sign to repay Xingji Industry product The loan units cannot be 220,000.00 220,000.00 100.00 marketing—Ji Weiying contacted. Shanxi Changzhi Chemical-Wang The loan units cannot be 13,798.45 13,798.45 100.00 Miao contacted. Account age exceeds 3 Zhang Yanqiang 14,060.00 14,060.00 100.00 years and has no sign to repay. Account age exceeds 3 Meng Jun 161,125.00 161,125.00 100.00 years and has no sign to repay Shahe Town Enterprise Bureau The loan units cannot be 56,400.00 56,400.00 100.00 industry Sale Company contacted. Account age exceeds 3 Fuyang Merchandise Building 2,000,000.00 2,000,000.00 100.00 years and has no sign to repay Other 3,585.96 3,585.96 100.00 End fund Total 33,636,293.80 33,636,293.80 4．Other receivable （1）Type analyse Balance in year-end Balance in year-begin Bad debt Bad debt Type Amount Proportion(%) Amount Proportion(%) reserve reserve Significant account receivable of 13,494,140.04 51.13 533,465.38 - 0.00 - single amount The receivables that the individual amount is not large but the risk is 4,776,163.65 18.10 4,776,163.65 5,323,832.29 21.10 5,323,832.29 great Other unsignificant of account 8,122,467.54 30.78 - 78.90 - receivable 19,903,577.19 Total 26,392,771.23 100.00 5,309,629.03 25,227,409.48 100.00 5,323,832.29 Note：Class standard of account recivable： 14 The receivables of large amount: The receivables that rank at top five and the total amounts account for 10% or more; ②The receivables that the individual amount is not large but the risk is great and the period more than 3 years; ③Other receivables which are not significant: the receivables besides ①,(2) (4) Individual recognition is adopted to account provisions for bad debts in other receivables. （2）Age analyse Balance in year-end Balance in year-begin Bad debt Bad debt Amount Proportion(%) Amount Proportion(%) Age reserve reserve 5,777,240.74 21.89 - 6,327,261.92 25.08 - Within 1 year 4,612,762.30 17.48 - 4,550,497.67 18.04 - 1-2 years 2-3 years 6,714,243.32 25.44 533,465.38 3,223,888.00 12.78 - 9,288,524.87 35.19 4,776,163.65 11,125,761.89 44.10 5,323,832.29 Over 3 years Total 26,392,771.23 100.00 5,309,629.03 25,227,409.48 100.00 5,323,832.29 （3）The top five accounts receivable at period end a loan of RMB 18.422 million in total, the ratio representing the total value of accounts receivable at period end was 69.8%. (4)There were no important accounts receivable from the main shareholders of the Company holding nore than 5% (including 5%) of the total shares of the Company. （4）In other receivables, the balance at the period end of the related parties is RMB 17.909 million, accounting for67.86% of the balances of other receivables. (6) The top 5 in accounts receivable Balance at the period end. Age Proportion% 1,332,884.02 Within 1 year 5.05 1,762,200.32 1-2 years 6.68 Large-diameter Co. 1,558,150.36 2-3 years 5.90 2,649,403.12 Over 3 years 10.04 Baoshi Zhonghe Steel Plastic Co 732,008.66 Within 1 year 2.77 388,300.69 1-2 years 1.47 487,116.59 2-3 years 1.85 15 1,734,616.41 Over 3 years 6.57 Shijiazhuang Baoshi Electrinic vacuum Glass 1,753,495.09 1-2 years 6.64 Co., Ltd. 2,908,410.20 2-3 years 11.02 143,699.41 Within 1 year 0.54 88,292.09 1-2 years 0.33 Baoshi Industry and trade 169,124.86 2-3 years 0.64 1,591,940.73 Over 3 years 6.03 Henan Anfei Electrinic 1,122,356.05 Within 1 year 4.25 Total 18,421,998.60 69.80 （7）The provision for devaluation of receivables which undero individual devaluation test Balance at the period Proporti Cause end. Age on% Insulation Factory 38,735.55 38,735.55 100.00 Insulator 15,280.40 15,280.40 100.00 Infrastructure Dept 1,080.00 1,080.00 100.00 Saige Zhongkang 161,568.10 161,568.10 100.00 Liu Liqi 5,000.00 5,000.00 100.00 Dongan Company 12,126.27 12,126.27 100.00 Xu Xin 100,000.00 100,000.00 100.00 Zhao Junqing 60,000.00 60,000.00 100.00 Electric cars into 43,366.86 43,366.86 100.00 Daming Gas plant 4,435.00 4,435.00 100.00 Telecom Bureau 4,400.00 4,400.00 100.00 Hebei Mobile 100.00 Debts age 32,000.00 32,000.00 exceeds 3 years Capsule Plant 30,890.01 30,890.01 100.00 and has no sign Yang Jizhan 787.20 787.20 100.00 to repay Han Xuming 5,500.00 5,500.00 100.00 Province Sofware Center 61,035.00 61,035.00 100.00 Zhao Junqing 135,000.00 135,000.00 100.00 Liu Shufen 2,190.00 2,190.00 100.00 Wang Qingfei 268.40 268.40 100.00 Cheng Ding 5,000.00 5,000.00 100.00 Industry and Trade Company 47,428.09 47,428.09 100.00 Delayed wages 48.72 48.72 100.00 Marketing Dept 22,294.41 22,294.41 100.00 Discount interest 232,810.80 232,810.80 100.00 City Sida 241,350.00 241,350.00 100.00 Enterprise business circumstances Henan Fuyang Baoshi 1,066,930.75 533,465.38 50.00 is not good and currently discussing repay affairs construction archives 70,000.00 70,000.00 100.00 Debts age 16 Anhui Antai 2,500.00 2,500.00 100.00 exceeds 3 years and has no sign Province Second construction No.5 100.00 to repay Dept 20,000.00 20,000.00 Foreign Affairs 100.00 Industrial Company 3,800.00 3,800.00 Huayun Winery 97.70 97.70 100.00 New Century Capsule 404,360.62 404,360.62 100.00 Mineral water plant 470,241.48 470,241.48 100.00 Industry and Trade Company 1,544,512.64 1,544,512.64 100.00 Advances transferred 147,557.46 147,557.46 100.00 Tanjing Instrumentation Electronics Import and 100.00 Export Company 266,745.75 266,745.75 Guizhou Xingqian union Antimony 100.00 Product Company 120,000.00 120,000.00 Pingshan Ore processing plant 35,461.95 35,461.95 100.00 Pingshan Material plant 8,602.16 8,602.16 100.00 Lingsou Hengshan Cold Reservoirm Management 100.00 Bureau 184.85 184.85 City Chemical Fertilizer Factory 563.80 563.80 100.00 Zhengding Xizhaotong 23,000.00 23,000.00 100.00 Zhongxing Mall 10,000.00 10,000.00 100.00 Xingjiang Coluured matals 100.00 Industry Company 37,122.88 37,122.88 Chongqing Tool Factory 0.98 0.98 100.00 Yanyang Caiyang Fitting factory 30,575.00 30,575.00 100.00 Jinzhou Kinescope Mould Factory 50,001.34 50,001.34 100.00 Liaoning Beili Vacuum Valve 100.00 Factory 1,000.00 1,000.00 Wenzhou Autocortrnl fitting 100.00 factory 121.03 121.03 Beijing Heavy fitting Motor 100.00 Factory 33.90 33.90 Beijing Forklift plant 1,500.00 1,500.00 100.00 Beijing Fan Plant 730.93 730.93 100.00 Shanghai Ocean Electrical Shop 40,426.00 40,426.00 100.00 Shanghai Hangtong Electrical 100.00 Company 8,613.98 8,613.98 Shanghai Automatization 100.00 Instrument Factory 902.00 902.00 Shanghai Hongjang Automatization 100.00 Instrument Factory 18,335.60 18,335.60 Tianjing Lixin Management Dept 132.44 132.44 100.00 Tianjing Zhongxing Plastic plant 1,000.00 1,000.00 100.00 Tianjing Lifting equipment Plant.Product Fitting service 100.00 Dept 13,400.20 13,400.20 Tianjing Jingxing Metal Company 1,024.00 1,024.00 100.00 Fujian Dongya Machine Company 130.00 130.00 100.00 Wenzhou Industry 100.00 1,560.00 1,560.00 17 Environmental protection machinery factory Rubber No.1 Factory 302.61 302.61 100.00 City Sprockets Factory 676.80 676.80 100.00 Shijiazhuang Graphite electrode plant, specialty 100.00 graphite products factory 25,000.00 25,000.00 Li Zhi 2,000.00 2,000.00 100.00 City Mould Plant 1,500.00 1,500.00 100.00 Shishi Coal Mine Machinery 100.00 Factory.Hydraulic Factory 1,120.00 1,120.00 Guangdong Foshan Water pump Plant 143.14 143.14 100.00 Yangzhou Asia Special Pump factory 19,880.00 19,880.00 100.00 Nanjing Trming Electrical 100.00 Technical Service Center 119.27 119.27 Anshan Thermal Meter 100.00 Factory 65.00 65.00 Shenyang ZhongjieFriendship 100.00 plant 35,969.53 35,969.53 Liaoning Chaoyang Transportation 100.00 Equipment Plant 4,522.94 4,522.94 Dongbei Technology Institute ,Economic and 100.00 technological Development Company 430.00 430.00 Shenyang Water pump Plant 172.60 172.60 100.00 Benxi Industrial rubber 100.00 fittingfactory 14,250.00 14,250.00 Shenyang GlassEquipment Marketing 100.00 Company 17.26 17.26 Hefei Hydraulic Service 4,655.00 4,655.00 100.00 Guilin Filter Factory 28.24 28.24 100.00 Hangzhou Oxygen Plant 32.75 32.75 100.00 Hangyang Equipment Engineering 100.00 Company 8,573.55 8,573.55 Hangyang Economy Development 100.00 Company 145.32 145.32 Xinxiang Lifting Equipment 100.00 Factory 46,200.00 46,200.00 Weifang Diesel engine Factory 897.54 897.54 100.00 Huaneng Jinan Qigong Company 969.65 969.65 100.00 Taiyuan Gas compressor 100.00 plant 450.00 450.00 Xian Bridged aerospace industry 100.00 Company 1,200.00 1,200.00 Bubei Paike Sealing Co., Ltd. 8.95 8.95 100.00 Nantian Union Electrical 100.00 Equipment Factory 10,000.00 10,000.00 Total 5,843,094.40 5,309,629.03 （8）Because the provision for bad debts of the company used the method of individual confirmation, all the 18 provisions for bad debts for other receivables were undergone impairment test. The reason for accounting provision for bad debts was that the loan time was too long and the loan companies could not be contacted or had no ability to repay. Note: Information on recovering provision for bad debts in the current year described in Note VII, 12. 5. .Prepayment (1) Age analyse Balance at the Balance in period end. Proportion(%) Proportion(%) year-begin Within 1 year 959,874.24 99.07 8,333,653.53 98.77 410.00 0.04 103,810.63 1.23 1-2 years 2-3 years 8,462.63 0.87 - - 132.65 0.01 Over 3 years Total 968,879.52 100.00 8,437,464.16 100.00 （2）There were no important accounts receivable from the main shareholders of the Company holding nore than 5% (including 5%) of the total shares of the Company. （3）Prepayments in late 2008 had more reduction than at the end of 2007 were because the purchase of steel and other raw materials must prepay, and in 2008, the demand for prepayments reduced. （4）The top 5 in .Prepayment Balance at the period end. Age Proportion% Luancheng Baoyun 49,796.60 Within 1 year 5.14 Zibo Gongtao 57,240.00 Within 1 year 5.91 Shanxi Tianlu Electronics 270,472.40 1-2 years 27.92 Equipment Co., Ltd Talian Jinke Precision 100,000.00 Within 1 year 10.32 Alloy Orient Thermoelectricity 309,555.02 Within 1 year 31.95 Company（No.3 plant） Total 787,064.02 81.23 6. Inventory and inventory depreciation reserve Balance in year-end Balance in year-begin Provision for Provision for Amount Balance Amount Balance devaluation devaluation Raw materials 34,231,551.69 20,142,456.40 14,089,095.29 29,959,070.70 20,634,066.64 9,325,004.06 Commodities in stock 39,348,127.08 10,299,174.54 29,048,952.54 32,590,511.89 8,806,344.25 23,784,167.64 Commissioned material processing 838,648.29 121,422.43 717,225.86 1,098,640.12 121,422.43 977,217.69 Material in transit 821,164.74 - 821,164.74 67,006.11 - 67,006.11 19 Product Cost 981,776.12 - 981,776.12 1,758,580.45 - 1,758,580.45 Total 76,221,267.92 30,563,053.37 45,658,214.55 65,473,809.27 29,561,833.32 35,911,975.95 Note: The reference for accounting provisions for inventory devaluation is that the net value of inventory at the period end is lower than the cost. In this period, the inventory that has accounted provision for inventory devaluation has correspondingly transferred back the provision for inventory devaluation RMB 533,398.95. The amount transferred back in this period accounted for 8.00% of the balance of the inventory at the period end. 7.Other current assets Balance in year-end Balance in year-begin Replace with US dollar 58,000,000.00 58,000,000.00 Financing expenses unconfirmed 609,389.92 689,946.00 Total 58,609,389.92 58,689,946.00 Note :Details about replacing US dollar are described in Note VII -22. The unconfirmed financing expense is the confirmed benefits for staff retirement and is accounted according to a certain rate. 8. Long-term equity investment Balance in year-begin Increase Decrease Balance in year-end Long-term equity investment - 200,000.00 - 200,000.00 （1）.Long-term equity investment(Investment type) Balance in year-end Balance in year-begin Associated enterprises investment 200,000.00 - Other investment - - Total 200,000.00 - （2）Long-term equity investment（Investment unit） Accounting Begin Provision Add to Proportion(%)Increase/Decrease Balance in for method year-end investment investment devaluation Shijiazhuang Baolihua Science Equity method 200,000.00 40.00% - -200,000.00 200,000.00 and trade Co., Ltd. Total 200,000.00 40.00% - - 200,000.00 200,000.00 （3）Joint ventures and associated enterprises Information 20 Proportion of voting right of the Business in Net profit in Nature of Net assets at Register place company in the current the current business period end period period the units being invested Shijiazhuang No.9, Huanghe Design and sale Baolihua Road, of mechanical Scientific Trading Shijiazhuang parts and 40.00% 500,000.00 - - Co., Ltd. non-standard equipment 9. Fexed assets and accumulated depreciation Book Balance in Increase in this Decrease in this Book Balance in year-begin period period year-end I. Cost 372,684,883.15 974,106.26 500,600.00 373,158,389.41 Incl：Houses and building 183,224,586.50 461,998.00 - 183,686,584.50 Machine and equipment 181,277,860.08 512,108.26 600.00 181,789,368.34 Transportation equipment 1,481,709.42 - 500,000.00 981,709.42 Other equipment 6,700,727.15 - - 6,700,727.15 II.Total accumulated depreciation 228,688,043.59 15,312,619.86 363,124.90 243,637,538.55 Incl：Houses and building 96,796,121.22 8,443,544.87 - 105,239,666.09 Machine and equipment 126,472,303.60 6,508,370.89 - 132,980,674.49 Transportation equipment 787,429.39 101,738.02 363,124.90 526,042.51 Other equipment 4,632,189.38 258,966.08 - 4,891,155.46 III.Total of fixed assetsdevalue provison 3,077,055.86 159,239.27 - 3,236,295.13 Incl：Houses and building - - - - Machine and equipment 3,077,055.86 159,239.27 - 3,236,295.13 Transportation equipment - - - - Other equipment - - - - IV.Total of fixed assets Book value 140,919,783.70 -14,497,752.87 137,475.10 126,284,555.73 Incl：Houses and building 86,428,465.28 -7,981,546.87 - 78,446,918.41 Machine and equipment 51,728,500.62 -6,155,501.90 600.00 45,572,398.72 Transportation equipment 694,280.03 -101,738.02 136,875.10 455,666.91 Other equipment 2,068,537.77 -258,966.08 - 1,809,571.69 Note: Information on Mortgages of Fixed assets, see Note 10. Information on idle fixed assets Original book Accumulated Provision for Net book value Notes value depreciation devaluation Houses and building Machine and 4,304,134.97 1,227,813.39 3,003,277.83 73,043.75 21 equipment Transportation equipment Other equipment 10. Intangible assets Book Balance in Increase in this Decrease in this Book Balance in year-begin period period year-end I. Cost Total 16,036,491.00 - - 16,036,491.00 Land use right 15,997,361.00 - - 15,997,361.00 Software 39,130.00 - - 39,130.00 II.Total of accumulative amortized 3,225,332.16 331,211,72 - 3,556,543.88 Land use right 3,196,800.16 325,563.72 - 3,522,363.88 Software 28,532.00 5,648.00 - 34,180.00 III.Total of intangible assetsdevalue - - - - reserve Land use right - - - - Software - - - - IV.Total of intangible assets value 12,811,158.84 -331,211.72 - 12,479,947.12 Land use right 12,800,560.84 -325,563.72 - 12,474,997.12 Software 10,598.00 -5,648.00 - 4,950.00 Note: Information on Mortgages of Fixed assets, see Note 10. 11. Long-term expenses to be amortized Accumulati Original Balance in Amourtizatio ve Balance in amount year-begin Increase in Transfer Out in n in this amortizatio year-end this year this period period n Other (Noble Metal) - 7,723,271.32 - 111,238.23 - - 7,612,033.09 Total - 7,723,271.32 - 111,238.23 - - 7,612,033.09 Note：Long-term unamortized expense is the metal stirring rods which have been put into use. The amount transferred out in the current year was the amount of re-processed raw materials. 12. Deffed tax assets Balance in year-end Balance in year-begin Bad debt reserve. 6,240,184.68 4,004,717.93 Inventory devaluation provision 5,057,386.86 5,989,879.67 Impairment loss of fixed assets 354,214.15 314,404.34 Welfare for workers’ dismissing 492,166.92 580,998.64 Loss to be made up - - Total 12,143,952.61 10,890,000.58 13. Assets devalue provision list Balance in Increase in this Resellers Switch back Balance in 22 year-begin year year-end I.Total of Bad debts provision 35,735,247.11 4,210,675.72 - 1,000,000.00 38,945,922.83 Incl: Account receivable 30,411,414.82 3,224,878.98 - - 33,636,293.80 Other receivable 5,323,832.29 985,796.74 - 1,000,000.00 5,309,629.03 II.Total stock Devalue provision 29,561,833.32 1,534,619.00 533,398.95 - 30,563,053.37 Incl：Stock Commodity 8,806,344.25 1,534,619.00 41,788.71 - 10,299,174.54 Raw Materials 20,755,489.07 491,610.24 20,263,878.83 III.Total of fixed assetsdevalue 3,077,055.86 159,239.27 - - 3,236,295.13 provision Incl：Houses, Building - - - - - Machinery Equipment 3,077,055.86 159,239.27 - - 3,236,295.13 Note1:The Company recovered the RMB 1 million borrowed by Shijiazhuang Power Fund Collection Office which the provsion for bad debts had fully accounted, and the bad debt loss RMB 1 million was transferred back.. Note 2：The Company accounted RMB 4,210,675.72 for the bad debt loss in Anyangxinyi Electronic Co., Ltd. Note 3：The Company accounted RMB 1,534,619.00 for provision for devaluation for stock components in the current year. Note 4：The Company accounted RMB 159,239.27 for provision for devaluation for sealed equipments in the current year. 14. Bill payable Balance in year-end Balance in year-begin Bank acceptance 1,082,099.08 89,999.90 Total 1,082,099.08 89,999.90 Note (1)Total Amount is RMB 89, 999.90,Notes payable have has expired, the unit holding the notes lost the notes, so they are not paid for a long term. （2）Bill payable for 2008 term end has increased more compare with 2007 term end，was because of defer loan payment time and draw up bills. 15. Accounts payable Balance in year-end Balance in year-begin Accounts payable 21,823,254.90 37,695,196.84 Total 21,823,254.90 37,695,196.84 Note：（1）The borrowing amount of the shareholder units holding more than 5% at the period end . （2）The closing balance of accounts payable contains the gas cost RMB 12,058,817.03 owed to Shijiazhuang Xinao Gas Company. （3）account payable for 2008 term end has decreased more compare with 2007 term end，is because of the change from power business to Enterprise and due to the decreasing dealing expenditure on power. 23 16. Advance accounts Balance in year-end Balance in year-begin Advance accounts 1,294,842.85 1,596,612.48 Total 1,294,842.85 1,596,612.48 17.Other payable Balance in year-end Balance in year-begin Other payable 24,213,158.91 41,028,540.44 Total 24,213,158.91 41,028,540.44 Note：The other payables at period end reduced RMB 16.8154 million over the period beginning, mainly because the debt owed to Baoshi Group reduced. 18. Payable Employee wage Bank Balance in Increase in this Payment amount i Bank Balance in year-begin year n this year year-end 1. Wage, Bonus and Allowance 11,635,910.45 11,635,910.45 39,429.06 2.Welfarism 1,860,620.59 1,860,620.59 3. One of the five insurance - 3,905,634.86 3,905,634.86 - 4.Labour union Outlay and 3,906,746.94 444,551.38 748,806.86 3,563,062.40 Education outlay 5.Refuse welfarism 3,013,939.00 476,044.00 911,927.00 2,578,056.00 Total 6,920,685.94 18,322,761.28 19,062,899.76 6,180,547.46 Note：The payable workers’ salary at the year end decreased RMB 0.7413 million than that at the year beginning, the reduction rate 10.69%, Causes for the change:in the current period, paid the staff dismission welfare accounted at period beginning. 19. Tax payable Bank Balance in Bank Balance in year-end Legal tax rate(%) year-begin VAT -5,002,316.36 -8,637,063.94 17% or13% City construction tax 247,847.18 -8,079.70 Turnover tax 7% Business tax 3,795,700.92 3,794,331.04 5% House tax 91,482.27 151,935.69 1.2% and12% Land tax - -0.01 9/㎡ and 5/㎡ Super-rate of Travel Tax -1,481.00 -1,481.00 progressive Income tax payable 162,353.98 -67,036.91 25% Education supertax 98,888.57 -14,403.62 Turnover tax 3% Locality Education supertax 28,150.22 -4,801.52 Turnover tax 1% Stamp tax 0.01 7,445.71 24 Super-rate of Individual income tax 250.58 0.10 progressive Total -579,123.63 -4,779,154.16 Note：Tax payable for 2008 term end has increased more compare with 2007 term end， is because of the deceases of VAT. 20. Interest payable Balance in year-end Balance in year-begin Loan interest 13,491,081.29 13,008,521.43 Total 13,491,081.29 13,008,521.43 Note：interest payable is consolidating by general office of finance of Henan and Shijiazhuang， because other did not collect，so no pay yet. 21. Other current liabilities Balance in year-end Balance in year-begin USD exchange 68,346,000.00 73,046,000.00 Other 353,226.94 Total 68,346,000.00 73,399,226.94 Note：In 1993,the Group signed the agreement on exchange of US dollars which agreed returning 10,000,000 US dollars to the Exchange Unit and repossess the RMB 58,000,000 exchanged in November 1998, As of December 31,2008, the Group still consults with the Exchange Unit on the returning of the exchange. 22. Other non-current liabilities Borrowing Balance in year-end Balance in year-begin conditions Credit loan 333,494.31 356,427.96 Hebei Finance Department Zhijiazhuang Fund raising 5,000,000.00 5,000,000.00 Credit loan office Credit loan Total 5,333,494.31 5,356,427.96 Note：Because the creditor did not ask for the debt, the debt did not have to be repaid, and the short-term loans were transferred to othr non-liquid liabilities. 23. Deferred income Balance in year-end Balance in year-begin Government subsidies 165,000.00 - Note：The ending balance was the part of environment treatment capital allocated by government which can not be included in the loss and gain in the current period. 24. Share Capital Balance in year-end Balance in year-begin Shares with conditional subscription 192,698,930.00 192,794,454.00 Shares with unconditional subscription 190,301,070.00 190,205,546.00 Total 383,000,000.00 383,000,000.00 25 25. Capital common reserve Increase in Decrease in Balance in year-begin Balance in year-end this year this year Capital stock premium 355,857,851.87 - - 355,857,851.87 Other capital reserve 29,332,650.75 - - 29,332,650.75 Total 385,190,502.62 - - 385,190,502.62 26. Surplus common reserve Increase in Decrease in this Balance in year-begin Balance in year-end this year year Surplus common 27,454,788.05 - - 27,454,788.05 reserve 27. Retained profit Retained profit at the end of last period -550,421,660.64 Add：The net profit which belongs to the owner of the parent company in this period. 4,139,364.81 The profit for distribution Less：The reserved fund extracted Less：The profit handed to the parent company The retained profit at the period end -546,282,295.83 28. Business income and Business cost Business income Business cost Same period of the Same period of the Report period previous year Report period previous year Glass Plain tub sales 73,742,738.40 48,361,606.45 54,874,255.86 39,423,785.42 Component sales 29,986,479.00 38,024,775.65 23,785,057.99 31,895,769.62 Subtotal of Main business income 103,729,217.40 86,386,382.10 78,659,313.85 71,319,555.04 Gas 44,499,824.45 65,486,348.61 34,297,622.59 65,486,348.81 Electricity 32,320,407.12 49,012,920.97 44,499,824.57 50,567,723.05 Other income 24,675,542.45 27,255,529.70 19,454,778.36 9,330,680.63 Subtotal of other business income 101,495,774.02 141,754,799.28 98,252,225.52 125,384,752.49 Total 205,224,991.42 228,141,181.38 176,911,539.37 196,704,307.53 Information on the top five clients according to business income: The ratio to the total sales income Total sales amount of the company(%) Shijiazhuang Baoshi Electronic vacuum Glass Co., Ltd. 83,887,523.66 40.88% Shijiazhuang Boshi Electronic 50,941,898.35 24.82% Group Co., Ltd. Henan Ancai Hi-Tech Co., 45,493,855.26 22.17% 26 Ltd. Henan Anfei Electronic Glass 6,204,658.09 3.02% Co.,Ltd. Shenzhen Shaige Sanxing Holding 5,566,410.50 2.71% Co., Ltd. Total 192,094,345.86 93.60% Note：The total income of the top five clinets according to business income was RMB 192.09.43, accounting for 93.6% of the total business income of the current year. Information on the top five clients according to main business income: The ratio to the total sales income of the Total sales amount company（％） Henan Anfei Electronic Glass 45,493,855.26 43.86% Co.,Ltd. Shijiazhuang Baoshi Electronic 37,834,712.28 36.47% Group Co., Ltd. Shijiazhuang Baoshi Electronic vacuum Glass Co., Ltd. 7,391,769.23 7.13% Henan Anfei Electronic Glass 6,204,658.09 5.98% Co.,Ltd. Shenzhen Shaige Sanxing Holding 5,566,410.50 5.37% Co., Ltd. Total 102,491,405.36 98.81% Note：The total income of the top five clinets according to Main business income was RMB 102.49, accounting for 98.81X% of the total main business income of the current year. 29. Business tax and additional Standard Amount in this period Business tax 5% 142,600.70 House tax 12% and 1.2% 224,223.84 City safeguard 7% and construction tax 534,417.46 Education surtax 4% 305,381.43 Total 142,600.70 30. Sales and management expenses Report period Same period of the previous year Sales expenses 2,305,340.05 854,857.59 Management expenses 18,929,825.17 20,637,374.43 Note The sales costs increased RMB 1.4505 over the same period in previous year, mainly because the increase of sale of glass tubes and the sale costs increased. (The management costs increased RMB 1.7076 over the same period in previous year, mainly because the company strengthened cost control. 27 31. Financial expenses Report period Same period of the previous year Interest expenses 1,400,660.85 1,337,348.91 Less：Income from interest 39,530.77 12,310.58 Exchange loss（Or Gains） -4,963,109.35 -5,290,431.11 Commission charge 5,751.26 4,026.20 Other 19,703.00 - Total -3,576,525.05 -3,961,366.58 32. Assets Devalue losses Amount in current period Amount in the same period of last year Bad debts losses 3,110,675.72 -736,060.04 Decline in value of inventories prepared 1,001,220.05 -5,088,168.75 Fixed assets 159,239.27 Total 4,271,135.04 -5,824,228.79 Note：Except the situations listed in Note Seven-13, the Company recovered the receivable fund of Shijiazhuang Capital Collection Office RMB 100, 000 which had been taken as bad debt, and the capital devaluation loss- loss of bad debts was reduced. 33. Investment income The joint venture company of the company Shijiazhuang Baolihua Scientific Trade Co., Ltd. had not started to operate, and the company had no investment income in the current year. 34. Non-operating incme Report period Same period of the previous year Loss of fixed assets - - Net Income of disposition fixed assets - - Income of debt restructuring - - Forfeit income - - Government subsidy 35,000.00 - Other - - Total 35,000.00 - The non-business income in 2008 was the environment treatment fund allocated by Shijiazhuang Finance Payment Center which should be confirmed as the income in the current year. 35. Non-operating expenses Report period Same period of the previous year Loss of fixed assets - - Net loss of the loss of non-current 90,325.10 370,426.93 assets disposal Loss of debt restructuring - - Special loss - - Forfeit 300.00 5,889.60 28 Other - 376.31 Total 90,625.10 376,692.84 36. Income tax expenses Report period Same period of the previous year Expense of current income tax 1,477,521.74 1,595,216.00 Expense of deferred income tax -1,253,952.03 5,727,257.86 Total 223,569.71 7,322,473.86 37. Other cash received from business operation Amount Electronics to raise funds to refund 1,112,758.34 the deposit and interest Sale waste 1，098,283.75 Total 2,211,042.09 38. Other cash paid for business activities Amount Sales expense 326,513.07 Management expense 2.951,221,50 Travel loans 807,798.82 Total 4,085,533.39 39. Supplement information (Cash Flow Statement) Same period of the Report period previous year I.Adjusting net profit to net cash flow in operating activities : Net profit 4,897,858.57 11,143,867.78 Add: Provision for impairment of assets 5,371,135.04 -5,824,228.79 Fixed assets depreciation, depletion of oil and gas 15,312,619.86 15,232,786.09 assets, depreciation of capitalized biological assets Amortization of intanglible assets 331,211.72 334,413.72 Amortization of long-term deferred expenses Loss on disposal fixed assets, intangible assets and 90,325.10 370,426.93 long-term assets Loss on scrapping of fixed assets Loss from fair change（Less：Gains） Financial expenses -3,576,525.03 -3,961,366.58 Losses arising form investment（Less：Gains） decrease of deferred tax assets -1,253,952.03 5,727,256.48 Increase feferred income tax assets(Less: decrease) 29 Decrease in investories( Less：Gain) -9,746,238.60 -11,442,599.75 Decrease in operating reveivables（Less：Gain） 22,478,828.06 -5,749,709.89 Increase in operating receivable（Less：decrease） -27,177,378.92 7,236,820.23 Other -3,299,766.83 Net cash flows form operating activities 3,428,116.94 13,067,666.22 2.Investing and financing activities that do not involving cash receipts and payment Conversion of debt into capital Reclassify convertible bonds to be expired within one year as current liability Fixed assets financed by finance leases 3.Net increase in cash and cash equivalents Cash at the end of the period 17,507,703.02 14,705,272.08 Less：Cash at the beginning of the period 14,705,272.08 1,781,405.86 Add：Cash equivalents at the end of the period Less：Cash equivalent at the beginning of the period Net increase in cash and cash equivalents 2,802,430.94 12,923,866.22 VIII.Parent company of main statement Notes(Unit：RMB) 1. Account receivable （1）Type analyse Balance in year-end Balance in year-begin Impairment Impairment Proporti provision Proporti provision Amount on％ Amount on％ Significant account receivable 104,070,137.00 82.08 8,041,810.32 106,540,555.26 80.83 8,041,810.32 of single amount The receivables that the individual amount is not large 16,246,827.89 12.81 16,246,827.89 16,592,157.54 12.51 13,021,948.91 but the risk is great Other unsignificant of account 6,467,253.77 5.10 - 8,694,699.83 6.66 - receivable Total 126,784,218.66 100.00 24,288,638.21 131,927,412.63 100.00 21,063,759.23 Class standard of account recivable： (1)The receivables of large amount: The receivables that rank at top five and the total amounts account for 10% or more; ②The receivables that the individual amount is not large but the risk is great and the period more than 3 years; ③Other receivables which are not significant: the receivables besides ①,(2) 30 ④The method for the accounting of provision for bad debts of the company is individual confirmation, provisions for bad debts were accounted on the receivables for more than three years and other receivables may not be recovered. （2）Age analyse Balance in year-end Balance in year-begin Impairment Impairment Proportion provision Proportion provision Amount ％ Amount ％ 102,454,908.45 80.82 - 104,971,055.77 79.57 - Within 1 year 24,000.00 0.02 - 3,796,390.00 2.88 759,278.00 1-2 years 2-3 years 3,796,390.00 2.99 3,796,390.00 6,567,809.32 4.98 3,714,040.00 20,508,920.21 16.18 20,492,248.21 16,592,157.54 12.58 16,590,441.23 Over 3 years Total 126,784,218.66 100.00 24,288,638.21 131,927,412.63 100.00 21,063,759.23 Note：The receivable balance on December 31, 2008 Decrease RMB 5.1432 million than that at the end of 2007, the decrease rate 3.9%. （3）The top five accounts receivable at period end accumulated a loan of RMB 118.8978 million in total, the ratio representing the total value of accounts receivable at period end was 93.78%. （4）There were no important accounts receivable from the main shareholders of the Company holding nore than 5% (including 5%) of the total shares of the Company. （5）In other receivables, the balance at the period end of the related parties is RMB 92.0922 million, accounting for72.64% of the balances of other receivables. （6）The top 5 in accounts receivable Balance at the Age Proportion% Relation period end. The same Shijiazhuang Baoshi Electrinic vacuum Within 1 Glass Co., Ltd. 92,092,228.93 year 72.63% parent company Within 1 Henan Ancai Gaoke Co., Ltd. 8,305,655.87 6.55% Regular client year Tianjing Anjing Electrinic Over 3 8,041,810.32 6.34% Client Glass Co., Ltd. years Over 3 Baoshi TV Factory 6,661,700.00 5.25% Other year Anyang Xinyi Electrinic 3,796,390.00 2-3 years 2.99% Client GlassCo., Ltd. Total 118,897,785.12 93.78% （7）The provision for devaluation of receivables which under of individual 31 devaluation test Balance at Propor Provision for the period tion(% Cause end. bad debts ) Tianjing Anjing Electronic Stopped and had no 8,041,810.32 8,041,810.32 100 Glass Co., Ltd. ability to repay Anyang Xinyi Electrinic Glass The group belonging to is 3,796,390.00 3,796,390.00 Co., Ltd. 100 bankrupting The loan units cannot be Shenzhen Dimotai Industry 56,244.44 56,244.44 100 contacted. Tianjing Jingjing Glass 266,960.00 266,960.00 Co.,Ltd. 100 Inconsistent balance The loan units cannot be Jiangshu Chemical 27,435.00 27,435.00 100 contacted. Stopped and had no Baoshi Trade Company 269,792.40 269,792.40 100 ability to repay Stopped and had no Baoshi Process Factory 921,915.24 921,915.24 100 ability to repay The loan units cannot be Anyang Radio tube Factory 68,486.00 68,486.00 100 contacted. Account age exceeds 3 Fuyang Baoshi 186,050.75 186,050.75 100 years and has no sign to repay Shijiazhuang Radio and TV Company. Economic 483,604.75 483,604.75 100 The loan units cannot be Department contacted. The loan units cannot be Nanning Wireless No.3 Factory 1,061,353.90 1,061,353.90 100 contacted. Baoshi TV Factory 6,661,700.00 6,661,700.00 100 Bankrupting Tianjing Communication Tadio The loan units cannot be 570,000.00 570,000.00 100 Company contacted. Anyang Dali Electrinic The loan units cannot be 45,006.00 45,006.00 100 Company contacted. Shanxi Huguan Chemical The loan units cannot be 101,200.00 101,200.00 100 station contacted. Shanxi Chengzhi Chemical The loan units cannot be 20,840.00 20,840.00 100 station contacted. The loan units cannot be Shixinsheng Industry Company 27,050.00 27,050.00 100 contacted. The loan units cannot be Jingjing Sale Building 12,600.00 12,600.00 100 contacted. Account age exceeds 3 Zhang Jinjiang 42,500.00 42,500.00 100 years and has no sign to repay The loan units cannot be Shilichao Trade Company 1,001,600.00 1,001,600.00 100 contacted. The loan units cannot be Xinxiang Industry and trade 36,960.00 36,960.00 100 contacted. Shunping Home The loan units cannot be 74,070.00 74,070.00 100 Appliances contacted. 32 The loan units cannot be Wuji Home Appliances 2,500.00 2,500.00 100 contacted. Xinle People Security The loan units cannot be 33,600.00 33,600.00 100 Dept contacted. Account age exceeds 3 Shi Zhenghong 10,000.00 10,000.00 100 years and has no sign to repay Xingji Industry product The loan units cannot be 220,000.00 220,000.00 100 marketing—Ji Weiying contacted. Shanxi Changzhi Chemical-Wang The loan units cannot be 13,798.45 13,798.45 100 Miao contacted. Account age exceeds 3 Zhang Yanqiang 14,060.00 14,060.00 100 years and has no sign to repay Account age exceeds 3 Meng Jun 161,125.00 161,125.00 100 years and has no sign to repay Shahe Town Enterprise Bureau The loan units cannot be 56,400.00 56,400.00 100 industry Sale Company contacted. The loan units cannot be Fuyang Merchandise Building 3,585.96 3,585.96 100 contacted. Other 24,288,638.21 24,288,638.21 End fund Total 2.Other receivables （1）Type analyse Report period Same period of the previous year Depreciation Depreciation Amount Proportion％ reserve Amount Proportion％ reserve Significant account receivable 13,494,140.04 64.74 533,465.38 1,316,890.85 6.95 of single amount - The receivables that the individual amount 4,876,774.57 23.40 4,706,163.65 10,055,761.94 53.11 4,253,832.29 is not large but the risk is great Other unsignificant of account 2,472,887.49 11.86 - 7,562,055.56 39.94 - receivable Total 20,843,802.10 100.00 5,239,629.03 18,934,708.35 100.00 4,253,832.29 Note：Class standard of other recivable： ① The receivables of large amount: The receivables that rank at top five and the total amounts account for 10% or more; ②The receivables that the individual amount is not large but the risk is great 33 and the period more than 3 years; ③Other receivables which are not significant: the receivables besides ①,(2) (4) Individual recognition is adopted to account provisions for bad debts in other （2）Age analyse Balance in year-end Balance in year-begin Bad debt Bad debt Amount Proportion(%) Amount Proportion(%) reserve reserve Within 1 year 4,928,474.69 23.64 - 2,758,599.69 14.57 - 1-2 years 2,576,917.72 12.36 - 2,974,888.72 15.71 241,350.00 2-3 years 2,974,888.72 14.27 533,465.38 3,145,458.00 16.61 - Over 3 years 9,218,524.87 44.23 4,706,163.65 10,055,761.94 53.11 4,012,482.29 Individual recognition - - - - - Total 20,843,802.10 100.00 5,239,629.03 18,934,708.35 100.00 4,253,832.29 （3）The top five accounts receivable at period end a loan of RMB 13.4941 million in total, the ratio representing the total value of accounts receivable at period end was 64.47%. (4)There were no important accounts receivable from the main shareholders of the Company holding nore than 5% (including 5%) of the total shares of the Company. （5）In other receivables, the balance at the period end of the related parties is RMB 12.5139 million, accounting for 60.04% of the balances of other receivables. (6) The top 5 in other accounts receivable Balance in Bad debt Age Proportion % year-end reserve 1,332,884.02 Within 1 year 6.39 1,762,200.32 1-2 years 8.45 Large-diameter Co. 1,558,150.36 2-3 years 7.48 2,649,403.12 Over 3 years 12.71 732,008.66 Within 1 year 3.51 388,300.69 1-2 years 1.86 Baoshi Zhonghe Steel Plastic Co 487,116.59 2-3years 2.34 1,734,616.41 Over 3 years 8.32 143,699.41 Within 1 year 0.69 Shijiazhuang Baoshi Industry and 88,292.09 1-2 years 0.42 trade Company 169,124.86 2-3 years 0.81 1,591,940.73 Over 3 years 7.64 34 Henan Anfei Electronic Glass Co., Ltd. 1,122,356.05 Within 1 year 5.38 Fuyang Baoshi Glass Co., Ltd. 1,066,930.75 2-3 years 5.12 533,465.38 Total 13,494,140.04 64.74 3.Long-term equity investment Balance in year-b Balance in year-en Increase Decrease 少 egin d Long-term equity 61,169,306.96 200,000.00 - 61,369,306.96 investment （1）Long-term equity investment（Investment unit）） Balance in year-end Balance in year-begin Associated enterprises 200,000.00 - investment Other investment 61,169,306.96 61,169,306.96 Total 61,369,306.96 61,169,306.96 （2）Long-term equity investment(Investment unit) Increase Provision Account Begin Add to Propor Balance in Name /decreas fordevaluati method investment investment tion year-end e on Cost Colr bulb Co. 439,341,956.80 - 81.26% - 378,172,649.84 61,169,306.96 method Shijiazhuang Lihua Equity 200,000.00 200,000.00 40.00% - 200,000.00 Scientific method Trade Co., Ltd. Total 439,541,956.80 - 378,172,649.84 61,369,306.96 - （3）Main information on joint venture and joint owned enterprises Total The ratio of Total business voting right of amount of Net profit in Name of units being income in Registered address Business nature the company in net capital the current invested the the units being at period period current invested end period Machinery parts, Shijiazhuang No.9, Huanghe non-standard Lihua Scientific 40.00% 500,000.00 - - Road,Shijiazhuang equipments, Trade Co., Ltd. mode design and sale 4.Business income /Business cost 35 Business income Business cost Amount in current Amount in the same Amount in current Amount in the same period period of last year period period of last year Glass sale 73,742,738.40 48,361,606.45 54,874,255.86 39,423,785.42 Component Sale 29,986,479.00 38,024,775.65 23,785,057.99 31,895,769.62 Total of main 103,729,217.40 86,386,382.10 78,659,313.85 71,319,555.04 business income Natural gas 44,499,824.45 65,486,348.61 34,297,622.59 65,486,348.81 Electricity 32,320,407.12 49,012,920.97 44,499,824.57 50,567,723.05 Other income 22,794,010.45 25,373,997.70 17,899,800.14 9.002.031.76 Total of other 99,614,242.02 139,873,267.28 96,697,247.30 125,056,103.62 business income Total 203,343,459.42 226,259,649.38 175,356,561.15 196,375,658.66 （1）Information on top five clients according to main business income of the company: Total amount of sales The ratio accounting for sales income of main income business of the company (%). Henan Ancai Hi-Tech Co., 45,493,855.26 43.86% Ltd. Shijiazhuang Baoshi Electronic 37,834,712.28 36.47% Group Co., Ltd. Shijiazhuang Baoshi Electrinic vacuum Glass Co., Ltd. 7,391,769.23 7.13% Henan Anfei Electronic Glass Co., Ltd 6,204,658.09 5.98% Shenzhen Saige Sanxing Holding 5,566,410.50 5.37% Co., Ltd. Total 102,491,405.36 98.81% Note：The total amount of top five clients according to main business income was RMB 102.4914 million, accounting for 98.81% of the the total amount of main business income in the current year. （2）Information on top five clients according to main business income of the company: The ratio accounting for sales income of Total amount of sales income main business of the company (%). Shijiazhuang Baoshi Electrinic vacuum Glass Co., Ltd. 83,887,523.66 41.25% Shijiazhuang Baoshi Electronic 50,941,898.35 25.05% Group Co., Ltd. Henan Ancai Hi-Tech Co., 45,493,855.26 22.37% Ltd. Henan Anfei Electronic Glass Co., Ltd. 6,204,658.09 3.05% Shenzhen Saige Sanxing Holding 5,566,410.50 2.74% Co., Ltd. Total 192,094,345.86 94.47% Note：The total income of the top five clinets according to business income was RMB 192.09, accounting for 94.47% of the total business income of the current year. 5. Supplement information (Cash Flow Statement) 36 Same period of the Report period previous year I.Adjusting net profit to net cash flow in operating activities : Net profit 850,399.86 6,849,178.11 Add: Provision for impairment of assets 5,371,135.04 -5,727,128.79 Fixed assets depreciation, depletion of oil and gas assets, 12,958,042.15 12,857,420.46 depreciation of capitalized biological assets Amortization of intanglible assets 331,211.72 334,413.72 Amortization of long-term deferred expenses Loss on disposal fixed assets, intangible assets and long-term 90,325.10 370,426.93 assets Loss on scrapping of fixed assets Loss from fair change（Less：Gains） Financial expenses 664,169.00 363,125.19 Losses arising form investment（Less：Gains） decrease of deferred tax assets 5,727,256.48 Increase feferred income tax assets(Less: decrease) Decrease in investories( Less：Gain) -9,746,238.60 -11,442,599.75 Decrease in operating reveivables（Less：Gain） 22,735,096.06 -4,142,464.40 Increase in operating receivable（Less：decrease） -25,848,372.63 7,931,895.83 Other -3,836,919.47 Net cash flows form operating activities 3,568,848.23 13,121,523.78 2.Investing and financing activities that do not involving cash receipts and payment Conversion of debt into capital Reclassify convertible bonds to be expired within one year as current liability Fixed assets financed by finance leases - 3.Net increase in cash and cash equivalents Cash at the end of the period 17,328,431.91 14,385,269.68 Less：Cash at the beginning of the period 14,385,269.68 1,407,545.90 Add：Cash equivalents at the end of the period Less：Cash equivalent at the beginning of the period Net increase in cash and cash equivalents 2,943,162.23 12,977,723.78 IX. Relation with related parties and related transactions(Unit：RMB) 1. Related Parties with controlling relation (1) Related Parties with controlling relation Registered Organization Relationshipw Economic address Code ith the nature Main Buiness Company Shijiazhuang Baoshi Electronic 10441204-2 Final Limited Electrinic Group Co., 9 Huanghe glass and other Controlli liability 37 Ltd. Road, supporting ng compa electronic company y Shijiazhuang products High-tech Industrial Development Area, Shijiazhuang, Hebei Province 9 Huanghe 23604225-8 Road, Shijiazhuang High-tech Limited Controlled Industrial subsidiary liability Development compay Area, Shijiazhuang, Investmentin Colr bulb Co. Hebei Province companies (2) The registered capital of the related parties with controlling relationship and the change thereof Balance in year-end Balance in year-Begin Shijiazhuang Baoshi Electrinic Group 1,389,272,300.00 1,389,272,300.00 Co., Ltd. Colr bulb Co. 540,681,957.00 540,681,957.00 (3) The shares or equity of the company held by therelated parties with controlling relationshipand the change thereof Balance in year-end Balance in year-Begin Proporti Proporti Amount Amount on（％） on（％） Shijiazhuang Baoshi Electrinic Group Co., Ltd. 198,159,208.00 51.74 198,146,657.00 51.74 2. Nature of the non-relationship with related parties Relationship with the Company Shijiazhuang Baoshi Electrinic vacuum Glass Co., Controlled by the same parent company Ltd. Shijiazhuang Baoshi Large-diameter plastic Controlled by the same parent company tube Co., ltd. Shijiazhuang Baoshi Zhonghe Steel Plastic Controlled by the same parent company Shape Co., Ltd. Shijiazhuang Baoshi Ruiming Co., Ltd. Controlled by the same parent company Shijiazhuang Baodong Electrinic Co.,Ltd. Controlled by the same parent company Hannan Fuyang Baoshi Glass Co., Ltd. Controlled by the same parent company 38 3. The transactions with the ultimate holding company ①Sales Goods, provice of raw materials and Work in process Unliquidated Items Transactions amount Pricing policy Sales raw materials Make price and two sides 37,940,204.56 - agreement Make price and two sides Sales power 13,107,186.07 - agreement Assets ues expense Make price and two sides Shijiazhuang Baoshi 421,891.61 - agreement Electrinic Group Co., provide personal Make price and two sides Ltd. 1,424,069.07 - services agreement Provide repair incom Make price and two sides 108,475.33 - agreement Subtotal 53,001,826.64 - Note: On September 26, 2008, Shijiazhuang Baoshi Electronic Group Co., Ltd. signed an agreement with the Company to rent the assets of Power Branch of the Company and pay rental charge. The personnel expenses of Power Branch shall be borne by Baoshi Group Co. and paid to the Company in the form of service charge. （2）Purchase power, Raw materials, assets leases of payable,services fee of payable Unliquidated Items Transactions amount Pricing policy Make price and two sides Sale of raw materials 1,892,169.17 agreement Assets leases of Make price and two sides 1,885,000.00 - Shijiazhuang Baoshi payable agreement Electrinic Group Co., Purchase Group 1,257,183.17 - Make price and two sides Ltd. Power agreement Enterprise service Make price and two sides 6,406,421.89 - agreement fee of payable Subtotal 11,440,774.23 Note 1: On September 26, 2008, Shijiazhuang Baoshi Electronic Group Co., Ltd. signed an agreement with the Company to rent the assets of Power Branch of the Company. After the signing of the agreement, Baoshi Group Co. is responsible for settling all power costs and the power needed by the Company is purchased from Baoshi Group Co. Note 2: The personnel employed by the glass tube project of the Company belong to Baoshi Group Co. and their remuneration is paid in the form of service charge. 4.Nature of the non-relationship with related parties Transaction Unliquidated Items Pricing policy s amount Sales of raw Make price and two sides materials and work agreement in process 9,932,448.27 26,844,346.19 Make price and two sides Shijiazhuang Baoshi Sales power 76,495,754.42 65,247,882.74 agreement Electrinic vacuum Glass Co., Ltd. Provide repair Make price and two sides income 962,779.88 - agreement Make price and two sides Lease income 1,905,560.70 4,661,905.29 agreement Subtotal 89,296,543.27 96,754,134.22 39 Make price and two sides Sales power 1,930,997.22 agreement Provide repair Make price and two sides Other related income 232,241.15 agreement parties Make price and two sides Lease income 276,268.00 agreement Make price and two sides Subtotal 2,439,506.37 agreement 5．Current account of associated enterprises （1）Account reveivable Balance in Balance in Proportio 比例(%) year-end year-begin n(%) Shijiazhuang Baoshi Electrinic vacuum Glass Co., Ltd. 92,092,228.93 65.27 92,205,606.14 36 Hannan Fuyang Baoshi Glass Co., Ltd 186,050.75 0.13 186,050.75 0.26 Total 92,278,279.68 65.4 25,574,150.15 36.26 （2）Other receivable Balance in Balance in Proportio 比例(%) year-end year-begin n(%) Shijiazhuang Baoshi Electrinic vacuum Glass Co., Ltd. 4,661,905.29 26.73 5,062,209.20 73.8 Shijiazhuang Baoshi Large-diameter 7,492,521.92 26.71 6,739,132.19 5.59 plastic tube Co., ltd. Shijiazhuang Baoshi Zhonghe Steel 3,476,504.34 12.49 3,152,002.65 3.06 Plastic Shape Co., Ltd. Shijiazhuang Baoshi Ruiming Co., Ltd. 511,213.05 0.51 129,130.00 3.32 Shijiazhuang Baodong Electrinic 699,924.70 1.79 452,317.24 0.46 Co.,Ltd. Hannan Fuyang Baoshi Glass Co., Ltd 1,066,930.25 4.23 1,066,930.25 1.07 Total 17,908,999.55 64.22 16,601,721.53 87.3 （4）Account payable Balance in Balance in Proportio 比例(%) year-end year-begin n(%) Shijiazhuang Baoshi Zhonghe Stee 0.00 0 74,824.86 0.32 Plastic Shape Co., Ltd. Total 0.00 0 74,824.86 0.32 （5）Other payable Balance in Balance in Proportio 比例(%) year-end year-begin n(%) 40 Shijiazhuang Baoshi Electrinic Group 2,361,143.26 54.69 22,439,412.95 39.7 Co., Ltd. Shijiazhuang Baoshi Ruiming Co., Ltd. 410,000.00 1.00 410,000.00 1.00 Total 2,771,143.26 55.69 22,849,412.95 40.7 X. External security and commitment events. In 2006, the Group signed (contract number : 072006100101) mortgage contract with the Development Zone Branches of Shijiazhuang Commercial Bank, providing 18.8 million Yuan mortgage security for Shijiazhuang Construction & Investment Co., Ltd, the mortgage property: the land located at NO. 8 Electronic Plant Street, Chang’an District(land No.CA-2-8-3), and the house located at No.8 Chang’an District(House Ownership No.1900027). This loan has been overdue, the Shijiazhuang Commercial Bank have transferred the loan to Hebei Guoxing Assets Operation Co., Ltd, Hebei Guoxing Assets Operation Co., Ltd has agreed the extension of the loan. XI. Other important events 1. According to the resolutions of the 19th meeting of the fifth board of directors of the Company, the Company and Shijiazhuang Baoshi Electronic Group Co., Ltd. (hereinafter referred to as "Baoshi Group Co."), the controlling shareholder of the Company, decided after consultation that Baoshi Group Co. should be responsible for the business of energy and power supply for which the Company was originally responsible and the Company should purchase energy and power including water, electricity and natural gas from Baoshi Group Co. Meanwhile, the energy and power assets related to supply of water, electricity and natural gas originally operated by the Company are rent to Baoshi Group Co. and relevant personnel are transferred as service personnel. 2. As of the end of 2008, the amount of accounts receivable from Shijiazhuang Baoshi Electrovacuum Glass Co., Ltd. (hereinafter referred to as "Baoshi Electrovacuum") was RMB 96.75 million. This amount is the balance of arrears formed by the Company's long-term supply of power and component sales to Baoshi Electrovacuum. The repayment schedule made by Baoshi Electrovacuum in September 2008: Repayment of at least RMB 12 million in 2009, repayment of RMB 10 million in 2010 and full repayment of all arrears by installments from 2011 to 2015. XII.Supplement Information： 1. The net asset income rate and the income of each share were accounted according to the No. 9 of Information Disclosure Rules for Companies which are Publicly Listed - Net Asset Income Rate and the Calculation and Disclosure of Each Share issued by China Securities Regulatory Commission: Return on net assets（%） Earnings per share Profit for the report period Weighted Fully Fully diluted Fully diluted average diluted(EPS) Business profit 5,177,053.38 2.08 2.09 0.01 0.01 Netprofit attributable to shareholder of common share of 4,139,364.81 1.66 1.67 0.01 0.01 the company Net profit after 3,283,914.88 1.32 1.33 0.01 0.01 deductingnon-recurring gains 41 and losses attributable to shareholder of commonshare of the cmpany Note：Calculation method on return on equity and earnings per share： （1）Fully diluted return on equity Fully diluted return on equity=P÷E Of which:P refers to Net profit attributable to common shareholder of the Company or net profit after deducting non-recurring gains and losses attributable to common shareholder of the Cmpany ; E refers to net assets at the period-end attributable to common shareholders of the company. When the Company prepared and disclosed the consolidated statement, “ Net profit attributable to common shareholder of the Company” excluded minority interest, : net profit after deducting non-recurring gains and losses attributable to common shareholder of the Company” would be calculated based on consolidated net profit after deducting minority interests; deducting non-recurring gain and loss of parent company(ther company should consider influence of income tax) and non-recurring gain and loss of each subsidiary (the company should consider influence of income tax) and non-recurring gain and loss of each subsidiary (the company shluld consider influence of income tax); : net assets at the period-end attributable to common shareholders of the company” excluded minority interests. （2）Weighted average return on equity Weighted average return on equity=P/（E0＋NP÷2＋Ei×Mi÷M0－Ej×Mj÷M0±Ek×Mk÷M0） Of which：P REFERS TO Net profit attributable to common shareholder of the Company or netprofit after deducting non-recurring gains and losses attributable to common shareholder of the Company; NP refers to net profit attributable to common shareholders of the Company; EO refers to net assets at the period-begin attributable to common shareholders of the company; Ei refers to net assets increased due to issuance of new share ordebts for equity swap or attributable to common shareholders of the 42 Company; Ej refers to net assets decreased due to repurchased or dividends in cash or attributable to common shareholders of the Company; Mo refers to the number of months during the report period; Mi refers to the number of months from the next month when net assets decreased to the end of the reort period; Ek refers to change of increase/decrease of net assets due to other transaction events; Mk refers to the number of months from the next month when other net assets changed the end of the report period. （3）Earnings per share-basis EPS=P÷S S=S0＋S1＋Si×Mi÷M0-Sj×Mj÷M0-Sk Of which：P refers to net profit attributable to shareholders holding ordinary shares or net profitattributable to shareholders holding ordinary shares after deducting non-recurring gains and lossesl S weighted average number of ordinary shares issued out; S0 refers to total number of shares at the period-begin; S1 refers to the number of shares increased due to transferring capital reserve into share capital or dividend distribution of shares during the report period; Si referrs to the number of shares incueased due to issuance of new shares or debt for equity swap during the report period; Sj refers to the number of shares decreased due to stock repurchase during the report period; Sk refers to the number of split-share during the report period; M0 refers to the number of months during the report period; Mi refers to the number of months from the next monthe to the end of the report period for increase of sharesl Mj refers to the number of months from the next month to the end of the report period for decrease of shares. （4）Earnings per share-diluted EPS-diluted=[P+（Potential diluted interests of ordinary shares recognized as expense－Transfer fee）× （1-income tax rate）]/（S0＋S1＋Si×Mi÷M0-Sj×Mj÷M0-Sk+weighted average amount of ordinary shares 43 increased due to warrant , share options, convertible bood. Of whichA:P refers to net profit attributable to shareholders holding ordinary shares or net profit attributable to shareholders holding ordinary shares after deducting non-recurring gains and losses; SO refers to total number of shares at the peiod-begin; S1 refers to the number of shares increased due to transferring capital reserve into share capital or dividend distribution of shares during the report period; Si refers to the number of shares increased due to issuance of new shares or debt for equity swap during the report period; Sj refers to the number of shares decrease dut to stock repurchase during the report period; Sk refers to the number of split-share during the report period; M0 refers to the number of months during the report period; Mi refers to the number of months from the next month to the end of the report period for increase of shares; Mj refers to the number of months from the next month to the end of the report period for decrease of shares. The Company shall consider all influence on potential diluted interests of ordinary shares when the company calculated diluted earnings per share, till to minimum diluted EPS . 2. Items and amounts of non-operating profit or loss Amount （1）Gain/loss form disposal of non-current assets and Provision for impairment of assets including -90,325.10 the preparation of the write-off part . (2)Tax refund, deduction and exemption that is examined and approved by authority exceeding or - has no official approval document. (3)Governmental Subsidy accounted as current gain/loss, except for those subsidies at with amount 35,000.00 or quantity fixed by the national government and closely related to the Company’s business operation. (4)Capital occupation fee collected from non-financial organizations and accounted as current - gain/loss. （5）The investment cost for obtaining of subsidiaries, joint venture companies, and - joint owned companies was smaller than the income of fair value of identifiable net assets of the units being invested. (6)Non-monetary asset exchange gain/loss. - （7）Gain/loss investment of Commission - (8)Asset impairment provisions for force major such as natural disasters - (9) Gain/loss from debt reorganization - (10) Enterprise reorganization expenses, such as payment to stuff placement and consolidation - expenses (11) Gain/loss from trades obviously departed from fair value - (12) Net gain/loss of current term from consolidation of subsidiaries under common control from - beginning of term to the consolidation date (13) Gain/loss from debt forcasting without connection to the main business operation - （14）In addition to the valid value keeping business relating to normal business of the company, the company held the loss and gain of fair value from transactional financial assets and transactional financial liabilities, and the investment income by disposing transactional financial assets, transactional financial liabilities and financial assets for sale. 44 （15）The provision for devaluation of receivables which undero individual 1,000,000.00 devaluation test transferred back. （16）Commissioned external loans by the Gain/loss （17）The use of fair value measurement model of follow-up to the fair value of real estate investment gains and losses arising from changes （18）According to tax, accounting and other laws, regulations, the requirements of the current Gain/loss for a one-time adjustment of the impact of the current Gain/loss; （19）Entrusted with the operating of the trust to obtain fee income （20）Net amount of non-operating income and expense except the aforesaid items -300.00 （21）Other non-recurring Gains/loss items 112,758.34 Total 1,057,133.24 Income tax (Non-regular lass and gain amount RMB 1,057,133.24- non-regular loss and 14,283.31 gain of the Subsidiary company was RMB 1,000,000.00)* 0.25 Gains and loss of minority interest(the provision for devaluation of receivables 187,400.00 which undergo individual impairment test transferred back * Ratio of minority equity) Amount of influence of Net profit 855,449.93 XIII. Explanations for differences between domestic and overseas accounting standards On September 12, 2007, China Securities Regulatory Commission (CSRC) promulgated a Notice on the Issues Concerning Audit of Companies that Issue Foreign Investment Shares Listed in China, announcing the cancellation of the “Dual Audit” requirements in the previously promulgated information disclosure regulations that a company issuing foreign investment shares listed in China conducts an overseas audit while it engages a certified public accountants entitled to securities business for audit from the date of promulgation of this Notice. Our company has not prepared a financial report under the overseas accounting standards since 2007, and the financial report announced by the company was prepared according to the Accounting Standards for Business Enterprises of China; therefore, there are no differences between domestic and overseas accounting standards this year. 45 Summary Statement of Fund Occupation by the Controlling Shareholder and other Relate Prepared by: Shijiazhuang Baoshi Electronic Glass Co., Ltd. Relation ship Listed between compan Interest of fund Interest fund Name of y Balance of fund Type of fund occupati Accumulative of fund occupied Accumulative fund accounti occupied at Balance of fu occupation amount of funds occupie amount of funds occupatio on party ng of beginning of in 2008 occupied in 2 party and the payable in 2008 d in repaid of 2008 n party accounti 2008 （if listed 2008 ng any） compa subjects ny Controllingsh Shijiazh areholder, uang Controll Other actual Baoshi ing receivab -22,439,412.95 107,562,554.56 87,484,284.87 -2,361,14 controller Electrini sharehol le and its c Group der affiliated Co., Ltd. Shijiazh Contro uang lling Baoshi compan Other Large-di y and receivab 6,739,132.19 1,337,214.02 583,824.29 7,492,52 ameter its le plastic affili tube Co., ated ltd. Shijiazh Other Contro uang receivab 3,152,002.65 732,008.66 407,506.97 3,476,50 lling le Baoshi compan Zhonghe y and Steel Account its -74,824.86 85,968.86 11,144.00 Plastic payable affili Shape ated Co., Ltd. Contro Other Shijiazh receivab 129,130.00 506,395.49 124,312.44 511,21 uang lling le 46 Baoshi compan Ruiming y and Other Co., Ltd. its receivab -410,000.00 -410,00 affili le ated Contro Shijiazh lling uang compan Other Baodong y and receivab 452,317.24 406,132.08 699,92 Electrini 653,739.54 its le c affili Co.,Ltd. ated Contro Account lling receiva 186,050.75 186,05 Fuyang compan ble Baoshi y and Glass its Other Co., affili receivab 1,066,930.25 1,066,93 Ltd. ated 属 le 企业 Shijiazh Other Contro uang receiva 5,062,209.20 2,005,567.91 4,661,90 lling 1,605,264.00 Baoshi ble compan Electric y and Pin its Account Glass 91,805,301.13 92,444,571.65 92,157,643.85 92,092,22 affili payable Co., ated Ltd. Subtotal Total 85,668,835.60 204,927,716.78 183,180,416.41 107,416,13 - Subsidiary of listed Company and its affiliated Subtotal 47 Related natural persons and the legal persons controlled by them Subtotal Other related persons and their affilated Subtotal Total 85,668,835.60 204,927,716.78 183,180,416.41 107,416,13 - 48