深纺织Ｂ(200045)2008年年度报告（英文版）

深圳市纺织（集团）股份有限公司 2008 年年度报告 Shenzhen Textile (Holdings) Co., Ltd. 2008 Annual Report March 2009 深圳市纺织（集团）股份有限公司 2008 年年度报告 Table of Contents I. Brief Introduction of the Company II. Highlights of Accounting Data and Business Data III. Particulars about the Changes of Share Capital and Shareholders IV. Directors, Supervisors, Senior Executives and Staff V. Control Structure of the Company VI. Brief Introduction of Shareholders’ General Meeting VII. Report of the Board of Directors VIII. Repot of the Supervisory Committee IX. Important Events X. X Subsequent events XI. Financial Reports XII. List of Documents Available for Inspection Shenzhen Textile (Holdings) Co., Ltd. 2008 Annual Report 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. Chairman of the Board of Directors Wang Bin, General Manager Zhu Jun and Assistant General accountant Liu Yi represent and warrant the financial and accounting report in the annual report is true and complete. I. Brief Introduction of the Company 1. Statutory name of the Company: In Chinese:深圳市纺织（集团）股份有限公司 In English: SHENZHEN TEXTILE (HOLDINGS) CO., LTD. English abbreviation: STHC 2. Legal representative: Wang Bin General manager of the Company:Zhu Jun 3. Secretary to the board of directors: Chao Jin Securities affair representative：Liao Ruiyan Contact Address: 6/F, Shenfang Building, 3 Huaqiang North Road, Futian District, Shenzhen ZipCode: 518031 Tel : 0755-3776043 Fax : 0755-3776139 E-mail: chaoj@chinasthc.com liaory@chinasthc.com 4. Registered Address: 6/F, Shenfang Building, No.3 Huaqiang North Road, Futian District, Shenzhen Office Address: 6/F, Shenfang Building, No.3 Huaqiang North Road, Futian District, Shenzhen Zip Code: 518031 Website: http://www.chinasthc.com E-mail : szfzjt@chinasthc.com 5. Newspapers for Information Disclosure: Securities Times, Hong Kong Commercial Daily Internet Web Site for Publishing the Annual Report: http://www.cninfo.com.cn The Place Where the Annual Report is Prepared and Placed: The Secretariat of the Company 6. Stock exchange for listing: Shenzhen Stock Exchange Stock abbreviation: Shen Textile A ,Shen Textile B Stock code : 000045 200045 7. Other Relevant Information : 3 The date of first registration of the Company: August 1994 Registered Address: 6/F, Shenfang Building, No.3 Huaqiang North Road, Futian District, Shenzhen Registration No. of Legal Entity Business License: 4403011013060 Tax Registration No.: Di Shui Deng Zi No.: 440304192173749 Guo Shui Deng Zi No.: 440301192173749 Certified public accountants retained by the Company: Name: Shenzhen Pengcheng Certified Public Accountants Business address：5/F, Baofeng Building, No. 28, Dongmen South Road, Shenzhen, China II. Highlights of Accounting Data and Business Data (I) Main profit indicators of report year Items Amount(RMB) Operation profit 27,403,794.97 Total profit 50,627,867.06 Net profit attributable to shareholders of the listed 45,992,557.32 company Net profit after deducting of non-recurring gain/loss -4,330,649.46 attributable to the shareholders of the listed company Cash flow generated by business operation, net 31,011,247.27 Note：1. Items and amount of non-recurring gains and loss Items Year 2008 The gains from disposal of non-current assets 21,114,456.93 The fund possession cost collected from non-financial enterprises accounted for as profits or losses for current period 7,478,153.22 Single impairment test for impairment of receivables transferred back to preparation 12,774,650.00 Other non-operating income and expenditure beside for the above items -26,556.06 Other items of gains and losses that comply with the definition of non-recurring gains and losses 15,605,941.75 Less:Income tax 6,623,439.06 Minority shareholding gain and losses --- Non-recurring gains/losses after deducting of impacton 50,323,206.78 income tax and minority shareholders’gains/losses Notes： (1) The gains from disposal of non-current assets mainly include the income from assigning the use right of the land located in Nanling Village, Nanwan Subdistrict, Longgang District, Shenzhen and selling the shares of Shenzhen Victor Onward Textile Industrial Co., Ltd. held by the Company. (2) The fund possession cost collected from non-financial enterprises accounted for as profits or losses for current period is mainly the interest on arrears received by the Company from Chengdu 4 Gangpeng Real Estate Development Co., Ltd. (3) The writeback of provision for impairment of accounts receivable separately tested for impairment is the writeback of the provision for impairment made in the same period of previous year due to receipt of arrears from Chengdu Gangpeng Real Estate Development Co., Ltd. (4) Other items of gains and losses that comply with the definition of non-recurring gains and losses mainly include the profit obtained by the Company from the land assignment by Shenzhen East China Electronic Co., Ltd., a joint venture, and the lawyer's fee paid for the lawsuit concerning Chengdu Gangpeng Real Estate Development Co., Ltd. 2. The influence of the adjustment made according to international financial report standards on the net profit of the Company: According to the relevant regulations of Finance Department “Corporate Accounting Standards Explanation No.1”, “Corporate Accounting Standards Explanation No.2” and Caikuai Han (2008)no.60, when compiling the financial report of year 2008, the Company eliminates the differences between domestic accounting standards and international accounting standards in the notes of previous reports. There is no difference between domestic accounting standards and international accounting standards in the Company financial report after adjustment according to the relative regulations. . (II) Main Accounting Data and Financial Indicators over the Past Three Years as at the End of the Report Period 1. Main accounting data Unit:RMB Changed Year 2008 Year 2007 over last Year 2006 year（％） Before After adjustment adjustment Operating income 364,153,360.26 489,270,085.73 -25.57% 555,783,680.87 558,198,369.00 Total profit 50,627,867.06 17,407,508.77 190.84% 15,563,484.04 13,298,457.36 Net profit attributable to the shareholders of 45,992,557.32 11,554,100.29 298.06% 6,724,601.89 4,626,707.21 the listed company Net profit after deducting of non-recurring -4,330,649.46 -23,292,565.53 81.41% 354,756.08 3,136,918.40 gain/loss attributable to the shareholders of listed company Cash flow generated by business operation, 31,011,247.27 24,113,175.67 28.61% 46,895,948.92 46,895,948.92 net Changed End of 2008 End of 2007 over last End of 2006 year（％） After Before adjustmen After adjustment adjustment t Gross assets 565,791,088.77 680,557,137.56 -16.86% 660,297,042.84 661,047,141.67 5 Shareholders’ equity 417,227,296.51 363,329,286.62 14.83% 338,389,884.78 336,573,619.61 Capital stock 245,124,000.00 245,124,000.00 0.00% 245,124,000.00 245,124,000.00 2. Main Financial Indicators Unit:RMB Year 2008 Year 2007 Changed over last Year 2006 Before After Adjustment adjustment Basic gains per 0.19 0.05 280.00% 0.027 0.02 share(RMB/Share) Diluted gains per 0.19 0.05 280.00% 0.027 0.02 share(RMB/Share) Basic earning per share after deducting of -0.02 -0.10 80.00% 0.01 0.01 non-recurring gains/losses(RMB/Share) Net income on asset, fully 11.02% 3.18% Increased 7.84% 1.99% 1.37% diluted(%) Net income on asset, 11.91% 3.37% Increased .54% 1.90% 1.36% Weighted(%) Net income on asset, fully diluted and deducted -1.04% -6.41% Increased 5.37% 0.10% 0.93% non-recurring gain/loss(%) Net income on asset, weighted and deducted -1.12% -6.80% Increased 5.68% 0.10% 0.92% non-recurring gain/loss(%) Net cash flow per share generated by business 0.13 0.10 30.00% 0.19 0.19 operation (RMB/Share) Changed over last End of 2008 End of 2007 End of 2006 year（％） Before After Adjustment adjustment Net asset per share attributable to shareholders 1.70 1.48 14.86% 1.38 1.37 of the listed company(RMB/Share) III. Particulars about the Changes of Share Capital and Shareholders (I).Statement of changes in shares Unit: shares Before this change Increase/decrease this time (+ , - ) After this change 6 Transfe Issui Bo rred Proportio ng of nus Proportio Amount from Other Subtotal Amount n new sha n reserve share res s 1. Shares with conditional 148,769,348 60.69% -12,256,200 -12,256,200 136,513,148 55.69% subscription 1.State-owned share 2.State-owned legal person 148,721,760 60.67% -12,256,200 -12,256,200 136,465,560 55.67% shares 3.Other domestic shares Incl：Non-state owned domestic legal person shares Domestic nature person shares 4.Foreign shareholding Incl：Overseas legal person shares Foreign nature person shares 5. Executive 47,588 0.02% 0 0 47,588 0.02% shares IIShares with unconditional 96,354,652 39.31% 12,256,200 12,256,200 136,513,148 44.31% subscription 1.Common 46,854,652 19.11% 12,256,200 12,256,200 59,110,852 24.11% shares in RMB 2.Foreign shares in 49,500,000 20.19% 49,500,000 20.19% domestic market 3.Foregn shares in overseas market 7 4.Other III.Total of 245,124,000 100.00% 0 0 245,124,000 100.00% shares Change in conditional shares Unit：Shares Conditional Conditional Name of the shares at Released this Increased Reason of shares at end of Date of releasing shareholder beginning of year this year condition year year Shenzhen Commitme Investment nt of Share 148,721,760 12,256,200 0 136,465,560 September 11,2008 Management Co., structure Ltd. reform Executive Executive shares 47,588 0 0 47,588 － shares Total 148,769,348 12,256,200 0 136,513,148 － － (II) Particulars about the issuing and listing of shares 1.The Company did not issue new shares and derived securities in the previous three years by the end of the report period. 2.In June 1994 approval, the Company issued 3.8 million staff shares at the price of RMB 3.9 per share in February 1995. The staff shares were approved to be listed in February 1995. As of December 31, 2008, the senior executives of the Company held 70,500 shares. The trusted organ of the staff shares is China Securities Registration Settlement Co., Ltd. Shenzhen Branch. (III) Introduction to Shareholders 1. As of December 31, 2008, the Company had 20,380 shareholders in total including one shareholder of state-owned shares, 11,595 shareholders of A shares and 8,784 shareholders of B shares. 2. Particulars of the shareholding of the top ten shareholders as of December 31, 2008: Unit：Shares Total of shareholders 20,380 Top 10 shareholders Properties of Share Conditional Pledged or Name of the shareholder Total shares shareholder proportion % shares frozen Shenzhen Investment State-owned 60.67% 148,721,760 136,465,560 No Management Co., Ltd. legal person Domestic Huang Muxiu nature person 0.38% 938,400 shares Foreign Zheng Chuangjian 0.29% 721,850 natural person 8 HSBC BROKING Foreign legal SECURITIES(AISA)LIMI 0.29% 720,000 person TED-CLIENTS A/C Foreign Liu Hong 0.24% 590,000 natural person Domestic Zhou Xiaohong nature person 0.21% 524,000 shares VICTOR ONWARD Foreign legal PRINTING&DYEING 0.19% 455,000 person (HK) CO. LTD Foreign Wang Zhongming 0.19% 453,849 natural person Foreign He Yanling 0.17% 419,800 natural person Domestic Yin Hong nature person 0.17% 413,900 shares Top 10 holders of unconditional shares Name of the shareholder Unconditional shares Type of shares Shenzhen Investment Management Co., 12,256,200 RMB Common shares Ltd. Huang Muxiu 938,400 RMB Common shares Foreign shares placed in Zheng Chuangjian 721,850 domestic exchange HSBC BROKING Foreign shares placed in SECURITIES(AISA)LIMITED-CLIENT 720,000 domestic exchange S A/C Foreign shares placed in Liu Hong 590,000 domestic exchange Zhou Xiaohong 524,000 RMB Common shares VICTOR ONWARD Foreign shares placed in 455,000 PRINTING&DYEING (HK) CO. LTD domestic exchange Foreign shares placed in Wang Zhongming 453,849 domestic exchange Foreign shares placed in He Yanling 419,800 domestic exchange Yin Hong 413,900 RMB Common shares In the above table, there is no relationship between the shareholder Notes to the related holding state-owned legal person shares and other shareholders. relationship between the Whether there is relationship between holders of public shares is top ten shareholders or unknown. their concerted action Among the above shareholders, the one holding shares on behalf of the state is Shenzhen Investment Management Co. No. 3,4,5,7,8 and 9 shareholders are the ones holding foreign 9 investment shares. 3. Introduction to the Controlling shareholder of the Company (1) The shares held by :Shenzhen Investment Management Co., Ltd. account for 60.67% of the total share capital of the Company. Legal representative:Chen Hongbo, Date of establishment: October 13, 2004; Registered capital: RMB 1 billion. It is a solely state-owned company in Shenzhen. Business scope: Providing guarantee to municipal state-owned enterprises, managing state-owned equity of enterprises other than those directly supervised by Municipal State-owned Assets Commission, conducting asset reorganization, system transformation and capital operation of affiliated enterprises, making investment and doing other businesses authorized by the Municipal State-owned Assets Commission. （2）National Assets Regulatory Commission of Shenzhen Municipal People's Government is the actual controller of the Company. The chart of property right relationship between the Company and its actual controller: National Assets Regulatory Commission of Shenzhen Municipal People's Government │100% ↓ Shenzhen Investment Holding Co., Ltd. │60.67% ↓ Shenzhen Textile (Holdings) Co., Ltd. 4.Except Shenzhen Investment Management Co., the Company has no other legal person shareholders holding more than 10% (including 10%) shares of the Company. 5.The time for listing of shares subject to sale restriction Quantity of additional shares that can be listed Balance of shares Balance of shares Time and traded upon subject to sale not subject to Remark the expiration of restriction sale restriction sale restriction period September 11, 12,256,200 136,465,560 59,158,440 Shenzhen Investment 2008 Management Co., Ltd held 12,256,200 shares in the report period has been the sale restriction September 11, 136,465,560 195,624,000 Negotiating shares of 2009 Shenzhen Investment Management Co., Ltd. The quantity of shares held by the top 10 shareholders subject to sale restriction and conditions of sale restriction Name of Quantity of Time when Quantity of shareholder shares held shares can be additional shares Conditions of sale No holding shares by the listed and that can be listed restriction subject to sale shareholder traded and traded 10 restriction subject to sale restriction 1 Shenzhen 148,721,760 2008.9.11 12,256,200 The non-negotiable Investment shares of the Company Management will not be listed and Co., Ltd. traded within 24 2009.9.11 136,465,560 months. Within 12 months after the expiration of the said commitment period, the proportion of the number of the original non-negotiable shares sold by the controlling company through Shenzhen Stock Exchange to the total number of shares of Shenzhen Textile shall not exceed 5%. IV. Directors, Supervisors, Senior Executives and Staff (I). Basic information Name Sex Age Title Date of starting and ending Shares held at Shares held at year-beginning year-end Wang Bin Male 38 Board chairman 2007.1.5—2010.1.4 0 0 Director, 2007.1.5—2010.1.4 Zhu Jun Male 45 General 0 0 Manager Li 2007.1.5—2010.1.4 Male 56 Director 63,450 63,450 Jingqiang Wang Peng Male 39 Director 2007.1.5—2010.1.4 0 0 Independent 2007.1.5—2010.1.4 Yang Jichao Male 54 0 0 director Liu Independent 2007.1.5—2010.1.4 Male 47 0 0 Xiangqing director Independent 2007.1.5—2010.1.4 Huang Hui Male 44 0 0 director Chairman of 2007.1.5—2010.1.4 Gao Zuofu Male 56 the supervisory 0 0 committee Zhou 2006.12.18—2010.1.4 Female 51 Supervisor 7,050 7,050 Meirong Deng 2007.1.5—2010.1.4 Male 42 Supervisor 0 0 Kangcheng 11 Secretary to the 2007.1.5—2010.1.4 Chao Jin Female 46 board of 0 0 directors Feng Junbin Male 46 Deputy GM 2007.1.5—2010.1.4 0 0 Gao Guoshi Male 55 Deputy GM 2007.1.5—2010.1.4 0 0 Zhang 2007.1.5—2010.1.4 Male 43 Deputy GM 0 0 Hong Zhu Meizhu Male 44 Deputy GM 2008.9.23-2010.1.4 0 0 Assistant Chief 2007.1.5—2010.1.4 Liu Yi Male 55 0 0 Accountant (II). Position of directors, supervisors and senior executives Wang Bin served successively as secretary of Personnel Division of Equipment Branch of Henan Textile Machinery Plant, secretary of Communist Youth League of the Company, manager of a number of subsidiaries of the Company, general manager assistant and general manager of the Company. In the report period, He served as Board chairman of the Company. Zhu Jun served successively as secretary of Lige Village, Yutai County, Shandong Province, workshop director of Shandong Jining Cotton Mill, deputy factory director of Jining Chemical Fibre Factory, office director of Jining Textile Industry Company, deputy county head of Wenshang County, Shandong Province, office director of Shandong Textile Department, chief of Personnel Education Division, manager of Enterprise management Dept, general manager assistant and Deputy General Manager of the Company. In the report period, He served as Director and general manager of the Company. Li Jinqiang served successively as clerk of Shenzhen Baoan Xixiang Sugar Mill, section chief of Shenzhen Light Industry Company, director of Personnel Dept., general manager assistant, deputy general manager and deputy secretary of Party committee of the Company. In the report period, he served as director ,deputy secretary of Party committee and secretary of discipline committee of the Company. Wang Peng served successively as Economist of Shenzhen Jinzhong Co., Ltd., Manager assistant of Assets Management Dept of Shenzhen Construction Co., Ltd., Deputy Manager of Enterprise Reform Dept of Shenzhen Investment (Holdings) Co., Ltd. and Deputy Manager of Property right Management Dept of Shenzhen Investment (Holdings)Co., Ltd. Deputy office Manager of the Board, Deputy Manager of No.2 Enterprise Dept. of Shenzhen Investment (Holdings)Co., Ltd. In the report period, He served as Director of the Company. Yang Jichao, a senior Engineer, served successively as deputy director general of State Textile Ministry Produce Dept, Deputy director of Textile product Development Center, Deputy functionary of China Textile association Economy Trading ministry, General engineer of Tibet Municipality economy Trading committee, Minister of State Textile Bureau Planning Development Dept, Director of China Textile Information Center, Deputy secretary-general of China Textile Industry association. In the report period, He served as independent director of the Company. Liu Xiangqing served successively as section chief of Guangxi Finance Department , section chief of Guangxi Certified Public Accountants, served successively as minister of Shenzhen accountant office asset evaluation dept, Manager and deputy director of issued Dept, Chief partner of Shenzhen Huaxin Accountant office,director accountant . In the report 12 period, He served as independent director of the Company. Huang Hui, once worked at Nantong Municipal People's Government, Jiangsu Province and the Standing Committee of People's Congress of Shenzhen and was engaged in legislation work. He served as partner of Guangdong Shengtang Law Office. He now serves as independent director of the Company. In the report period, He served as independent director of the Company. Gao Zuofu, an ex soldier, served successively as head of Personal Guarantee Section of Guangning Commercial Bureau, Guangdong, manager of Guangning Overseas Chinese Commodity Supply Co., secretary of Party committee of Muge Town of Guangning County, general manager of Zhaoqing Dinghu District Pharmaceutical Company, deputy office director of Shenzhen Torch Industrial Company, section staff in charge of Shenzhen Municipal Enterprise Working Committee, deputy secretary of discipline committee and director of Discipline Inspection Room of Shenzhen Investment Management Co., Ltd. In the report period, He served as chairman of the supervisory committee of the Company. Zhou Meirong served as a statistician of No. 2 Mine of Guangdong Shaoguan Coal Bureau and chief section staff of Shaoguan Communist Youth League Committee, deputy secretary and secretary of Communist Youth League, deputy director and director of Party Office and office director of the Company. She now serves as chairman of labor union and director of Party committee office of the Company. In the report period, she serves as employee-representing supervisor of the Company. Deng Kangcheng served as technician of Shenzhen Luohu Material Trade Company, Deputy chief and chief of Shenzhen Construction Earthwork mechanical engineering Company, Secretary ,Deputy director and director of inspection and supervision Room of Shenzhen Construction Investment Company,Deputy director of Shenzhen Construction Investment Company, Director of Petition office. He new as director of office of Shenzhen investment Management Co., Ltd. In the report period, He served as supervisor of the Company. Feng Junbin served successively as special enterprise controller of Guangdong Dapu County Finance Bureau, deputy section head of Guangdong Fengshun County, director of Audit Dept., manager of Enterprise Management Dept., general manager assistant and supervisor of the Company. In the report period, he served as Deputy general manager of the Company. Gao Guoshi once served successively as physician of Hunan Liuyang Wenjiazhuang Municipal Hospital, president of Liuyang Yonghe Hospital, director general of Liuyang Municipal Health Bureau, member of standing committee of Liuyang municipal Party committee and deputy mayor of Liuyang municipal people's government, deputy director general and secretary of Party committee of Changsha Municipal Health Bureau, director general of Shenzhen Nanshan District Health Bureau, office director, member of Party Group and standing committee of CPPCC of Shenzhen Nanshan District, deputy general manager of Shenzhen Medicine Production and Supply Corporation and deputy general manager of Shenzhen Accordance Medical Co., Ltd. In the report period, He served as Deputy general manager of the Company. Zhang Hong, once served successively as assistant of China Textile University, cadre of China Textile Material Company, Chief of Management Dept of Shenzhen Textile (Holding) 13 Co., Ltd.,Company manager subordinate enterprises, General Manager assistant. In the report period, He served as Deputy general Manager of the Company. Zhu Meizhu, once served successively as chief Deputy general Manager of Enterprise Management Dept of the Company, Director of R & D Center, assistant General Manager, In the report period, He served as Deputy general Manager and Manager of Investment Development Dept of the Company. Chao Jin served successively as teacher of Shanxi Chinese Medicinal Material School and Jilin Business College, head of Employment Section of Personnel and Employment Dept. of the Company, office director and manager of Personnel Dept. of subsidiary and general manager secretary of the Company. In the report period, she served as the board secretary of the Company. (III). Annual remuneration In the report period, The annual remuneration of the chairman of the board of directors and general manager of the Company shall be paid according to the Provisional Regulations on Annual Salary System for Operators of State-owned Enterprises in Shenzhen. The annual remuneration of directors, supervisors and senior executives who receive salary from the Company shall be paid according to the Regulations on Salary Management examined and adopted at the second meeting of the fourth board of directors. The remuneration of independent directors shall be paid according to the resolutions of 2002 annual shareholders' general meeting of the Company. The remuneration of the current directors , supervisors and senior executives of the Company in 2008 is as follows: Name Position Remuneration(RMB’0000) Wang Bin Chairman of the board of 50.3 directors Zhu Jun 48.9 Director,General manager Li Jingqiang Director 42.3 Wang Peng Director 0(Receiving salary from corporate shareholder) Yang Jichao Independent director 5.0 Liu Xiangqing Independent director 5.0 Huang Hui Independent director 5.0 Gao Zuofu Chairman of the 48.9 supervisory committee Zhou Meirong Supervisor 36.6 Deng Kangcheng Supervisor 0(Receiving salary from corporate shareholder) Chao Jin Secretary to the board of 39.9 directors Feng Junbin Deputy general manager 41.5 Gao Guoshi Deputy general manager 41.4 Zhang Hong Deputy general manager 39.9 Zhu Meizhu Deputy general manager 33.2 (serving from Sept. 14 2008) Liu Yi Assistant Chief Accountant 30.7 Total 468.6 (IV).The resignation, appointment and removal in the report period In the report period, after examination at the 12th meeting of the fourth board ofdirectors ,Zhu Meizhu were elected as Deputy General Manager of the Company. (V). Staff As of December 31, 2008, the Company had 692 staff members in total, including 414 production employees, 29 sales employees,62 technical employees, 29 financial employees and 80 administrative employees. Among the employees,15 hold Master's degree or above, 137 are graduates of universities and junior colleges and 97 have education of technical secondary school. The number of retired staff was 105 . V. Control Structure of the Company (I).Status of corporate governance structure 1. General Introduction of the Corporate Governance According to the requirements of the Circular about Matters Concerning Strengthening Special Activities for Governance of Listed Companies issued by CSRC and the unified arrangement made by Shenzhen Securities Administration and Shenzhen Stock Exchange in respect of the special activities for strengthening the governance of listed companies, the Company carried out special activities of corporate governance and completed the work of three stages, i.e., self inspection, acceptance of public appraisal and rectification and improvement, in 2007 and published the Report on Rectification Result of Special Activities of Corporate Governance on October 31, 2007. According to the gist of (2008) No. 27 Announcement of CSRC, the Company conducted self inspection item by item by referring to the Report on Rectification Result of Special Activities of Corporate Governance, comprehensively inspected and summarized the rectification measures for the special governance activities in the previous stage and their effect. The Statement on Special Governance Activities was disclosed on July 19, 2008. In the report period, the board of directors of the Company further perfected the setup of special committees and established audit committee and nomination committee to guarantee more scientific and efficient operation. The Company made efforts to perfect work flow and standards and internal control system and unceasingly standardize its operation. Through special activities of corporate governance, the independence and standardization level of the Company's operation was enhanced and the Company's directors , supervisors and senior executives' awareness of standardized operation and prevention of operation risks was sharpened while the overall level of governance was enhanced in certain degree. At present, the actual conditions of corporate governance basically met the requirements of the regulatory documents issued by CSRC in respect of governance of listed companies. (II).The Existing Un-standardized Corporate Governance and the Relevant Measures of Improvement The company’s controlling shareholder, Shenzhen Investment Holding Co., Ltd is an enterprise directly supervised and administrated by Shenzhen State-owned Assets Supervision and Administration Commission. The company carries out the laws and regulations in respect of the state-owned assets management by the controlling shareholder and submits the 15 undisclosed information to the controlling shareholder in such a way as following: before the first ten-day of the month, submit the monthly chief financial index news; For the purpose of further strengthening the supervision of non-public information, the company strictly controlled the scope of insiders, standardized the information transfer process and presented the specified information of insiders and their relatives to Shenzhen Securities Regulatory Bureau according to the supplement to the Notice on Strengthening the Supervision of Listed Company’s Provision of Non-public Information to Major Shareholders and Actual Controllers released by Shenzhen Securities Regulatory Bureau. The company created an information file of insiders to strictly execute the related provisions, standardize the scope of use of non-public information, approval process and data filing procedure, and if necessary, the company will perform the information disclosure liability according to the related provisions. (III). Duty performance of independent directors Name of The supposed times of Attendance in Attendance through Absent independent director attendance this year person (times) agent (times) （times） Yang Jichao 9 7 2 0 Liu Xiangqing 9 9 0 0 Huang Hui 9 9 0 0 The board of directors of the Company has 3 independent directors, including 1 professor-level senior engineer in textile industry, 1 senior accountant and 1 senior lawyer. In the report period, the independent directors of the Company seriously and independently performed their duties, attended board meetings on time and without absence, gave original views on the business management, investment decision and standardized operation of the Company and expressed independent professional opinions on the appointment and dismissal of senior executives, investment decision, business management and standardized operation according to relevant provisions of the Company Law, the Articles of Association of the Company, Guiding Opinions on the Establishment of Independent Director System at Listed Companies and Guidelines for Administration of Listed Companies. The company ensured the decisions of the Board of Directors scientific and normative as well as protected the interests of the company and medium and minor investors. In the report period，independent directors of the Company did not make objection to proposals and other matters examined at all previous board meetings of the Company. (IV) Independent operation of the Company The Company was separated from its controlling shareholder in respect of business, personnel, assets, organ and finance. The company possesses dependent and complete business and has the capacity to make its own management decisions. （V）The Establishment and Perfection of the Internal Control System 1. Self-evaluation report on internal control Refer to the Report on Self-evaluation of Internal Control of Shenzhen Textile (Holding) Co., Ltd. disclosed on www.cninfo.com.cn on March 28, 2009. 2. Evaluation opinions (1) General evaluation The company established and perfected its internal control systems covering all its business links, set down the relatively perfect and reasonable internal control system, ensured the standardized operation and normal execution of its business activities, and protected the assets safety and integrity. The company 16 regulated its operation in respect to internal environment, goal setting, event identification, risk evaluation, risk treatment, control activities, information and communication, and supervision and inspection against the Guidelines for the Internal Control of Listed Companies, which basically met the requirements of the CSRC and Shenzhen Stock Exchange for internal control and had noticeable and successful effect of implementation. (2) Opinions of the Board of Supervisors on self-evaluation of internal control The company established and perfected its internal control systems covering all its business links, ensured the normal execution of its business activities and protected the assets safety and integrity pursuant to the relevant provisions of the CSRC and Shenzhen Stock Exchange, in compliance with the basic principle of internal control and in combination with its own actual situation. In 2008, the company did not breach the Guidelines for the Internal Control of Shenzhen Stock Exchange and its internal control system. The Self-evaluation of Corporate Internal Control of the company truly and objectively reflected the establishment and implementation of the internal control system of the company. (3)Opinions on the Self-evaluation of the Internal Control from the Supervisors of the Company The Board of Directors of the company deliberated and laid down a series of corporate management systems including the Internal Control System in pursuance of the national relevant laws and regulations and requirements of the regulatory authorities. The key internal control activities of the company were developed according to the provisions of the internal control system of the company. The company executed the rigorous, sufficient and effective internal control with respect to its subsidiaries, connected transactions, external guarantees, use of raised funds, significant investments and information disclosure, and the Self-evaluation of Corporate Internal Control of the company truly and objectively reflected the establishment, implementation and perfection of the internal control system of the company. VI. Brief Introduction of Shareholders' General Meeting (I) 2008 first provisional shareholders' general meeting of the Company was held on February 22,2008. The resolutions of the meeting were published on Securities Times and Hong Kong Commercial Daily on February 23, 2008. (II) 2007 annual shareholders' general meeting of the Company was held on May 16, 2008. The resolutions of the meeting were published on Securities Times and Hong Kong Commercial Daily on May 17, 2008. VII. 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 mainly engaged in the production and trading of textile products, garments , Polarizer sheet for LCD and relevant products and in the lease and management of properties. In the report period, Centered on scientific development and business transformation and taking the risk control and systematized management as paramount, the company perfected its internal control mechanism, intensified the risk management, revitalized stock assets, developed enterprise development potential, promoted the transformational development and obtained good operating results. The company’s revenue of the year reached RMB364.1534 million, down 25.57% over the same period of last year, and the net profits vested in the owners of parent company reached RMB45.9926 million, up 298.06% over the same period of last year. The main reasons for the growth of the Company's earnings: 17 (1) The Company invigorated assets in stock and obtained income from assignment of the use right of the land located in Nanling Village, Nanwan Subdistrict, Longgang District, Shenzhen; (2) The Company recovered arrears from Chengdu Gangpeng Real Estate Development Co., Ltd. by legal means to maintain asset safety. Industry: In the report period, the Company's income from manufacturing and total profit are respectively RMB 68.8472 million and RMB - 8.0336 million, which respectively decreased by 72.54% and 475.23% year on year mainly due to the change of consolidation scope and decrease of operating income and profit of Shenfang Lekai Photoelectronic Materials Co., Ltd. and Anhui Huapeng Textile Co., Ltd. Trade: In the report period，the income of the Company from trade was RMB 246.7335 million, an increase of 37.83% year on year. The total profit from trade was RMB 1.2259 million, a decrease of 12.46% year on year mainly due to decrease of profit of export trade enterprises caused by global economic recession. Property lease and management: The Company owns Shenfang Building and other properties including commercial stalls, factory buildings, office buildings and warehouses for lease. In the report period, the Company obtained income of RMB 65.2215 million from property lease, warehousing and hotel business, which increased by 2.24% year on year mainly because lease service enterprises guaranteed stable income from lease service through improving service, stabilizing customers, refining management and enhancing efficiency. In the report period, The Company’s main products: Product Sales income Sales cost Gross profit rate Polarizer sheet for 131,657,959.73 102,389,141.31 22.23% LCD Fully-shaped knitted 30,221,412.81 26,588,178.56 12.02% garment Notes：（1）In the report period, The gross profit rate of polarizer sheet for LCD is basically the same with that in the same period of previous year. (2) In the report period, the gross profit rate of knitted garment lowered by 7% year on year mainly due to decrease of export orders and rise in cost. The loss in 2008 is RMB 2.94 million, which was mainly due to decrease of export orders. 2. Operating status and results of main controlled subsidiaries and joint ventures Shenzhen Beauty Century Garment Co., Ltd. is engaged in production entirely-electronic figured full-shaped knitted garments. Registered capital of RMB 25 million , total assets of RMB 51.62 millioon and net assets of RMB 31.23 million. In 2008, it suffered loss of RMB 2.94 million, It is mainly due to decrease of export order . Shenzhen Shenfang Lekai Photoelectronic Materials Co., Ltd, is engaged in producing polarizer sheet products for LCD., Registered capital of RMB 78 million , total assets of RMB 176.55 millioon and net assets of RMB 113.09 million. It earned net profit of RMB9.39 million in 2008. Jiangxi Xuanli Yarn Industry Co., Ltd. is engaged in production of various stitch yarns and knitted garments., Registered capital of RMB 20 million , total assets of RMB 17.85 millioon and net assets of RMB-0.62 million. In 2008, it suffered loss of RMB 8.8 million, It is mainly due to provision for impairment of assets. 18 Shenzhen Shenfang Import and Export Co., Ltd. is engaged in export and import business.. Registered capital of RMB 5 million , total assets of RMB 35.15 millioon and net assets of RMB-8.8 million. It earned net profit of RMB0.73 million in 2008. Shenzhen Jinlan Decorative Articles Industrial Co., Ltd. is mainly engaged in production of bedroom articles series.. Registered capital of RMB 3.54 million , total assets of RMB 19.60 millioon and net assets of RMB 9.54 million. It earned net profit of RMB1 million in 2008. Shenzhen Lisi Industrial Co., Ltd. is mainly engaged in property lease and management. Registered capital of RMB 2.14 million , total assets of RMB 23.21 millioon and net assets of RMB 17.97 million. the property Leases rate was 99.0% and it earned net profit of RMB 2.2 million in 2008. Shenzhen Huaqiang Hotel. is mainly engaged in Guest room ,Hotel operation. Registered capital of RMB 10 million , total assets of RMB 21.84 millioon and net assets of RMB 16.99 million. The Hotel housing rate was 76.1% and it earned net profit of RMB 1.61 million in 2008. Shenzhen Zhongxing Fibre Folds Cotton Clothing Ornament Co., Ltd. is engaged in producing fiber fold cotton and relevant products. Registered capital of RMB 1.68 million , total assets of RMB 1.1 millioon and net assets of RMB -0.08 million. It earned net profit of RMB0.18 million in 2008. Shenfang Property Management Co., Ltd. is mainly engaged in property management and conduct property lease business for the head office of the Company. Registered capital of RMB 1.6 million , total assets of RMB 7.91 millioon and net assets of RMB 1.95million , In 2008, the average occupancy rate of the property leased on agency business was 99.5%. Its income from management fee was RMB 7.38 million. Its net profit was RMB 0.24million . Shenzhen Jingguang Footwear Co., Ltd. is engaged in producing footwear products. Registered capital of RMB 7.2 million , total assets of RMB 2.11 millioon and net assets of RMB 1.98million , This company has suffered operation loss due to lack of orders and production shrinkage in recent years. To further effectively integrate resources, this company went into liquidation in 2008. The difference between the book value of long-term equity investment and the amount of recoverable assets is RMB 449,866.59. The Company made corresponding provision for impairment of long-term equity investment. This amount of provision is small and has no significant influence on the Company's overall production and operation and operating results. 3. Main suppliers and customers The accumulative amount of purchase from the top five suppliers was RMB 124.52million, accounting for40.00 % of the Company's accumulative annual purchase amount. The accumulative amount of sales to the top five customers was RMB 278.4820 million, accounting for 76.47% of the Company's accumulative annual sales amount. (II) The investment of the Company 1.The Company did not raise funds in the report period. 2. In the report period, The Company built Nanlian bachelor's dormitory in Longgang with self-owned funds of RMB 28.5840 million as the supporting facilities of its Nanlian Industrial Park. The floorage of this dormitory is 17,163.14 square meters. In the report 19 period, this project was constructed as scheduled. 95% of work has been completed and the construction is to be completed in May 2009 as planned. (III) Analysis of the financial position and operating results of the Company 1. Analysis of the financial position and operating results of the Company As of December 31, 2008, the amount of total assets of the Company was RMB 565.7911 million, which decreased by 16.86% year on year mainly due to the change of consolidation scope and decrease of partial assets of Shenzhen Shenfang Lekai Photoelectronic Materials Co., Ltd. and Anhui Huapeng Textile Co., Ltd. The shareholders' equity for the parent company is RMB 417.2273 million, an increase of 14.83% year on year mainly due to the increase of the Company's net profit and accumulative net change in fair value of financial assets available for sale. The net profit for the owners of the parent company is RMB 45.9926 million, an increase of 298.06% year on year mainly due to income from sale of land use right and writeback of provision for impairment after successful recovery of creditor's assets. The net increase in cash and cash equivalents was RMB - 40.8858 million, a decrease of RMB 86.9314 million year on year mainly due to repayment of short-term loan. 2.Asset Sturcture and expenses change Items December 31, 2008 January 1, 2008 Increase/decrease Amount Proportion% Amount Proportion% (%) Money 84,022,925.18 14.85 124,908,748.97 18.35 -3.50 capital Account 5,927,101.61 1.05 45,900,339.22 6.74 -5.69 receivable Prepayments 10,320,610.92 1.82 12,923,615.58 1.90 -0.08 Other 31,869,860.76 5.63 22,607,747.17 3.32 2.31 receivable Inventories 12,169,064.23 2.15 44,384,315.38 6.52 -4.37 Long term 112,611,211.91 19.90 54,872,825.99 8.06 11.84 share equity investment Construction 30,646,285.87 5.42 4,959,719.40 0.73 4.69 in progress Fixed assets 83,916,970.31 14.83 181,694,810.68 26.70 -11.87 Short-term 46,000,000.00 8.13 105,612,393.54 15.52 -7.39 loans Account 18,859,027.41 3.33 36,094,528.13 5.30 -1.97 payable Account 11,475,644.76 2.03 5,106,386.43 0.75 1.28 advance Items Year 2008 Year 2007 Increase/decrease (%) Sales expenses 15,283,793.72 17,235,392.95 -11.32 20 53,348,135.78 58,840,282.62 -9.33 Administration expenses Financial 3,844,910.11 7,283,913.49 -49.21 Expenses Losses of devaluation of assets -2,719,717.27 35,922,300.97 107.57 Investment income 28,847,802.54 35,617,395.86 -19.00 Non-operating income 23,765,753.74 781,926.94 2,939.38 Income tax 6,414,975.98 5,441,318.26 17.89 Notes： (1) Monetary capital, accounts receivable, inventories and fixed assets respectively decreased by 32.73%, 87.09%, 72.58% and 53.81% mainly due to the change of consolidation scope and decrease of assets of Shenzhen Shenfang Lekai Photoelectronic Materials Co., Ltd., Anhui Huapeng Textile Co., Ltd. and Shenzhen Jingguang Footwear Co., Ltd. (2) Construction in progress increased by 517.9% year on year main because the Company constructed Nanlian bachelor's dormitory in Longgang with self-owned funds. (3) Long-term equity investment increased by 105.22% year on year mainly due to the change of consolidation scope and increase of long-term equity investment in Anhui Huapeng Textile Co., Ltd. accounted for on cost basis and long-term equity investment in Shenzhen Shenfang Lekai Photoelectronic Materials Co., Ltd. accounted for on equity basis. (4) Short-term loan decreased by 56.44% year on year mainly due to repayment of short-term bank loans by the parent company and Shenzhen Beauty Century Garment Co., Ltd., a subsidiary. (5) Accounts payable decreased by 47.75% year on year mainly due to the change of consolidation scope. (6) Advance collections increased by 124.71% year on year mainly due to receipt of customers' payment in advance at the end of the report period without delivering goods. (7) Financial expenses decreased by 47.21% year on year mainly due to year-on-year decrease of short-term bank loans. (8) Asset impairment loss decreased by 107.57% year on year mainly due to writeback of provision for impairment made in the previous period after successful recovery of arrears and year-on-year sharp decrease of provision for impairment made by subsidiaries for unsalable products. (9) Non-operating income increased by 2,939.38% year on year mainly due to income from assignment of land use right and recovery of interest on arrears owed by Chengdu Gangpeng Real Estate Development Company. 3.Cash fow statement data change Items Year 2008 Year 2007 Increase/decrease (%) Cash flow generated by 31,011,247.27 24,113,175.67 28.61 business operation, net Net cash flow generated by 633,802.08 13,174,077.91 -95.19 21 investment Net cash flow generated by -72,456,379.85 10,758,467.95 -773.48 financing Notes： (1) Net cash flows from operating activities increased by RMB 6,898,071.60and 28.61% mainly due to stronger control of accounts receivable and payment recovery rate. (2) Net cash flows from investing activities decreased by RMB 12,540,275.83and 95.19% mainly because decrease in monetary capital was accounted for as other cash payment related to investing activities as a result of change of consolidation scope. (3) Net cash flows from financing activities decreased by RMB 83,214,847.80 because the Company raised no new bank loans and repaid bank loans. 4. Change in profit structure in the report period as compared with the same period of the previous year. In the report period, the profit from industry accounted for -3.42% of the total profit, which increased by 4.6% year on year due to decrease of provision for impairment of assets by industrial enterprises. The profit from property lease and management accounted for 100.58% of the total profit, which increased by 0.6% year on year. The profit from trade accounted for 2.84% of the total profit, which decreased by 5.2% year on year mainly due to global economic recession. In the report period, the Company's income from selling shares of Shenzhen Victor Onward Textile Industrial Co., Ltd. decreased by RMB 35.395 million. The income from land assignment, writeback of provision for impairment of assets made in the previous period and interest on arrears total RMB 48.2975 million. This part of profit was accounted for as profit from property lease and management. (IV) Financial instruments and real estate for investment measured with fair value The Company directly designates the stock investment whose fair value can be reliably measured as financial assets available for sale. The change in its fair value has no direct influence on the profit of the Company. The Company conducts subsequent measurement of real estate for investment with cost mode. 1. Items related to measurement of fair value Unit ：RMB’0000 Accumulative Gains and Provision for Amount at the change of fair losses from impairment beginning of value Amount at the Items change of fair made in period accounted for end of period value in current current period as rights and period interests Financial assets： Of which ： 1. Financial assets calculated according to fair value whose change is accounted for as profits or losses for current period 22 Including: Derived financial assets 2. Trading financial 2,157.30 1034.53 4,120.34 assets Subtotal of financial assets 2,157.30 1034.53 4,120.34 Financial liabilities Property investment Production physical assets Other Total 2,157.30 1034.53 4120.34 2. The company did not hold financial assets in foreign currency. 3. Provisions of internal control for fair value: The company laid down the internal control system for fair value measurements and disclosure of available-for-sale financial assets in pursuance of the Accounting Standards for Business Enterprises and Basic Standard for Enterprise Internal Control. According to the accounting standard, the company laid down the procedures of fair value measurements and disclosure of available-for-sale financial assets on the basis of secondary securities market prices with the active market quoted price, and the Board of Directors, Board of Supervisors and senior management of the company would bear responsibility for the authenticity of the fair value measurements and disclosure of available-for-sale financial assets. In order to ensure the authenticity, timeliness, accuracy and completeness of the fair value measurements and disclosure of available-for-sale financial assets of the company, the internal control system provides that the fair value measurements and disclosure of available-for-sale financial assets should be evaluated by means of internal audit by a selected external agency and the evaluation of internal control for external audit should be accepted. (V) Prospect for future development 1. Development environment The company is mainly specializing in textiles & clothing, optoelectronic materials and property operation and management industries which constitute three points of support on which the company finds a foothold on the fiercely competitive market and avoid the market and policy risks of a single business. Since the second half of 2008, the constantly falling demand of the textiles in the international markets and reduction of the overseas purchase orders under the impact of the global financial crisis have been exercising a great influence on the export of textiles & clothing of our country. The enterprises in this industry all agree that the negative factors of the textiles & clothing of our country will still increase, and the appreciation between the exchange rate of the RMB to the Euro also weakens the advantage of export of the textiles of our country to a certain extent, in 2009 the export of the textiles of our country will tend to a graver situation. As the economic growth rate of our country significantly dropped in the third quarter, there will also be the risk of recession in demand of clothing existing at home. The LCD polarizer manufacturing business the company is engaged in has extremely broad market prospect as the global LCD industry transfers its focus to our country. It is forecasted that the annual average growth rate of the polarizer products in the global markets in the next 15 years will be higher than 11%, and the growth rate of the polarizer products in 23 China’s markets will be in the forefront. The recession made a huge impact on the flat panel display industry, and the panels have had a substantial price drop since the second quarter of 2008, which led to a sharp drop in the polarizer demand, and the average throughput of all polarizer manufacturers in the fourth quarter fell off sharply, and this is mainly a reflection of the financial crisis at the particular stage. In the long run, the supply and demand on polarizer products are balanced basically. At present, the polarizer manufacturers are distributed in Japan, Korea, Taiwan and mainland China. There are four enterprises engaged in the polarizer manufacturing in mainland China, and their annual output in 2008 was about 4.8 million ㎡, which was less than 10% of the quantity demanded at home. 2. Main advantages and existing difficulties The textiles & clothing products of the company adhere to the fine products line, participate in the market competition at a high starting point, take the lead in marching towards top grade fully fashion seamless clothing fields at home and make Japan the key high-end market. During the report period, the purchase orders of exported clothing of the company fell off sharply and the economic benefits were affected because of the impact of global financial crisis. The polarizer projects the company invested in have the leading position in the technology at home as well as have good development prospect. The company made a successful leap from low-end TN-LCD polarizer products field to HTN-LCD, black and white STN and color STN products field and made technical progress in TFT-LCD polarizer products field, and the product production and income level maintained a steady growth. As the limited production capacity of the company can not meet the market demand, the company did not achieve an economy of scale. As the main properties of the company are near the construction site of Shenzhen Metro Phase II project, blocking up the road during the metro construction brought about adverse effect on the lease and management of the properties, additionally, the economic slow-down made many enterprises to commence on downsizing or slow down their expansion steps, the property operation of the company will receive an impact to certain extent. 3. Working priorities in 2009 Faced with this grave economic situation, the company will duly seize opportunities, fully make the most of existing resources and actively meet the challenge. In 2009, the company will concentrate its efforts to do well the following work: (1) consolidating the industry foundation, doing well the resources integration and realizing the sound and coordinated development of the principal business; further optimizing the product structure, improving the product quality and grade of product varieties, and realizing the trial production of Phase II reconstructed and expanded production line of the polarizer project; continuing to boost the transformation and upgrading of the textiles & clothing enterprises, strengthening the brand promotion, and perfecting the construction of domestic marketing network; improving the comprehensive management level for the leased properties, actively adjusting the business strategy by leaning close to customer needs, and trying hard to reduce the adverse effect during the metro construction. (2) Accelerating the research and development of new products and independent technical innovation, actively making a good technical research and development of TFT－ LCD polarizer project as well as reserve of talents. 24 (3) Making a sustained effort to emphasizing the refined management, arousing the cost consciousness, further establishing and perfecting the management systems in combination with the comprehensive promotion of the Basic Standard for Enterprise Internal Control, standardizing the work flows and continuously strengthening the internal control and management. (4) Carrying out the principle of attaching equal importance to both human resources disposition and human resources development, continuing the perfection of performance appraisal, establishing the scientific and reasonable distribution system; implementing the corporate training of entire staff, strengthening the construction of talent pool, and cultivating and reserving talents for the corporate sustainable development. （VI）Routine work of the board of directors 1.Board meeting and resolutions in the report period. The 7th Meeting of the Fourth board of directors was held on February 3, 2008.The resolutions of the meeting were published on Securities times and Hongkong Commercial Daily on February 5, 2008. The 8th Meeting of the Fourth board of directors was held on April 18, 2008.The resolutions of the meeting were published on Securities times and Hongkong Commercial Daily on April 22, 2008. The 9th Meeting of the Fourth board of directors was held on July 7, 2008.The resolutions of the meeting were published on Securities times and Hongkong Commercial Daily on July 9, 2008. The 10th Meeting of the Fourth board of directors was held on July 18, 2008.The meeting adopted Notes special governance of Company were published on Securities times and Hongkong Commercial Daily on July 19, 2008. The 11th Meeting of the Fourth board of directors was held on August 11, 2008.The resolutions of the meeting were published on Securities times and Hongkong Commercial Daily on August 13, 2008. The 12th Meeting of the Fourth board of directors was held on September 23, 2008.The resolutions of the meeting were published on Securities times and Hongkong Commercial Daily on September 24, 2008. The 13th Meeting of the Fourth board of directors was held on October 20, 2008. The meeting adopted proposal concerning the Company's participation in competitive bidding for land use right of Longgang Great Industrial Zone. The 14th Meeting of the Fourth board of directors was held on October 24, 2008.The resolutions of the meeting were published on Securities times and Hongkong Commercial Daily on October 28, 2008. The 15th Meeting of the Fourth board of directors was held on December 22, 2008.The resolutions of the meeting were published on Securities times and Hongkong Commercial Daily on December 13,, 2008. The above announcement was disclosed on www.cninfo.com.cn designated by CSRC. 2.Implementation by the board of directors of the resolutions of the shareholders’ general meeting. In the report period, the board of directors of the company seriously implemented all relolutions adoped by shareholders’ general meeting according to relevant provisions of the Company law and the Articles of Association of the Company. (VII) Duty performance of specialized committees of the board of directors 1. Performance of duties of the Audit Committee In the report period, the Audit Committee of the Board of Directors of the company earnestly performed its duties, deliberated the preparation of the business budget statements in 2009 and consolidated statements of the company and brought forward its opinions. The 25 Audit Committee supervised the annual audit work in 2008 of the company, and its performance of duties is summarized as below: (1) Determine entire audit plan and check the corporate financial statement on January 21, 2009，the independent directors, Audit Committee and certified public accountants of Shenzhen Pengcheng Certified Public Accountants Co., Ltd. (hereinafter referred to as “the Certified Public Accountants") for annual audit who were engaged by the company held a communication meeting before access to the site for audit and determined the audit work arrangement of the company in 2008. On February 16,2009，independent directors and the audit committee reviewed the financial statements for 2008 prepared by the Company. In their opinion, the Company was able to conduct financial accounting in accordance with new accounting standards and the financial statements for 2008 prepared by the Company basically reflect the assets and liabilities and production and operation results of the Company as of December 31, 2008. They agreed to carrying out financial audit work for 2008 based on these financial statements. (2) Urging Certified Public Accountants in writing to enter the Company and do relevant work On February 20, 2009, Certified Public Accountants officially entered the Company to start audit. On March 10, the audit committee required Certified Public Accountants to complete field services on time according to audit plan and timely communicate work progress and the problems met in audit to the audit committee through sending the Letter of Audit Supervision and Urge. On April 11, The audit committee required Certified Public Accountants to complete audit work as soon as possible according to audit plan through sending the Letter of Audit Supervision again and Urge to guarantee ensure the board of directors' disclosure of 2008 annual report as scheduled. (3) Maintaining contact with the Certified Public Accountants and steadily focusing on the progress in audit work. On March 13, 2009，The Audit Committee, independent directors of the company and the Certified Public Accountants held a communication meeting in regard to the audit of annual report at which they communicated about the related problems which may occur during the audit of annual report. On March 18,2009，The Certified Public Accountants gave the preliminary audit opinions, and the convener of the Audit Committee convened the independent directors, the Certified Public Accountants and the company to have held a communication meeting in regard to the audit of annual report. At this meeting, the members of the Audit Committee went through the financial statements of the company over again and formed a written opinion after they had a full discussion with the independent directors and the Certified Public Accountants in respect of the matters which were brought to the attention in the audit report: they consider that the related data shown in the financial accounting statements of the company in 2008 basically reflected the assets & liabilities and production and operation results of the company ended December 31, 2008, and agree that they will prepare a audit report in 2008 according to these statements. (4) Examining proposals related to annual report On March 25,2009, Certified Public Accountants completed audit as scheduled and issued standard and unqualified auditor's report of the Company for 2008. On the same day, the audit committee reviewed this auditor's report and adopted the Resolution for Agreeing to Submitting Financial and Accounting Statements to the Board of Directors for Examination, Summarization Report on Audit Work of Shenzhen Pengcheng Certified Public Accountants Co., Ltd. for 2008 and the Proposal for Engaging Auditing Body for 2009. In the opinion of the audit committee, Shenzhen Pengcheng Certified Public 26 Accountants Co., Ltd. conducted work prudently, earnestly, meticulously and practically during audit for 2008 and ensured satisfactory completion of annual audit work as scheduled. According to the job performance of Shenzhen Pengcheng Certified Public Accountants Co., Ltd., the Audit Committee decided to propose the Board of Directors to re-engage the Certified Public Accountants as the company’s audit institution in 2009. The Audit Committee of the Board of Directors laid down the working rules for the audit of annual report in the Work Regulations: According to the job performance of Shenzhen Pengcheng Certified Public Accountants Co., Ltd., the Audit Committee decided to propose the Board of Directors to re-engage the Certified Public Accountants as the company’s audit institution in 2009. The Audit Committee of the Board of Directors laid down the working rules for the audit of annual report in the Work Regulations: Article 10 Working rules for the audit of annual report (1) The Audit Committee should determine the schedule of audit work of financial statements in the business year through negotiation with the Certified Public Accountants; (2) The Audit Committee should press the Certified Public Accountants to submit an audit report within the agreed time limit and record the method, times and result of pressing in the form of written opinions as well as the verification by signature of the related responsible person; (3) The Audit Committee should go through the financial accounting statements prepared by the company and form written opinions before the certified public accountants for annual audit access to the site; (4) The Audit Committee should strengthen the communication with the certified public accountants for annual audit who have accessed to the site and go through the financial accounting statements of the company over again and form written opinions after the certified public accountants for annual audit give the preliminary audit opinions; (5) The Audit Committee should vote on the annual financial accounting statements and submit them to the Board of Directors for review after it forms a resolution, meanwhile, it should submit to the Board of Directors a summary report on audit work of the company in this year which is done by the Certified Public Accountants as well as a resolution concerning further employment or change of employment of the Certified Public Accountants". 2. Duty performance of remuneration and appraisal committee of the board of directors In the report peiod, the Remuneration and Examination Committee brought forward professional opinions and advice on the performance appraisal system and long-acting incentive system of the company and reviewed the performance appraisal and payment of wages and bonuses and welfare expenses. The Remuneration and Examination Committee holds that the current salary system of the company was set down according to the specified decision procedure and the standard for payment of the salaries of directors, supervisors and senior management of the company meets the specified requirements. 3. Duty performance of strategic planning committee of the board of directors In the report period, strategic planning committee held three meetings, analyzed the development projects of the Company and gave concrete opinions on the development of the Company's polarizer sheet project. （VIII）Profit distribution preplan for 2008 As audited by Shenzhen Pengcheng Certified Public Accountants, the net profit of the Company for 2008 is RMB 44,212,891.08，and the net profit attributable to the owner’s parent company is MB45,992,557.32, According to the provisions of the Articles of Association of the Company, 10% of the profit for the parent company for 2008 is 27 RMB4,319,709.75， shall be allocated for statutory common reserve fund. With the total share capital on December 31, 2008, i.e., 245,124,000 shares, as the base, cash dividend of RMB 0.50 (including tax) is to be distributed for every 10 shares; It is predicated that the distributed dividend would be RMB 12,256,200,and the remained RMB26,621,187.78 would be transferred to the next year. Particulars about the cash bonus of the Company in previous three years Unit：RMB Ratio of net profit Net profit attributable attributable to owners Amount of cash bonus to owners of parent of parent company in (Included tax) company in consolidated consolidated statement Year 2007 0 11,554,100.29 0.00% Year 200 0 4,626,707.21 0.00% Year 2005 12,256,200.00 21,639,239.45 56.64% （IX）Other matters 1.Shenzhen Pengcheng Certified Public Accountants issued special statement on fund occupation by the controlling shareholder of the Company and other related parties . Refer to www.cninfo.com.cn for details. 2.The special statement and independent opinions of the independent directors of the Company on the guarantees provided by the Company in the report period: According to the Circular on Certain Issues Relating to Standardization of FundTransfer Between Listed Companies and Their Related Parties and Guarartees Provided by Listed Companies (Zheng Jian Fa(2003) No.56 Document), the Circular on Strengthening Disclosure of Information about Fund Occupation and Regulation-violating Guarantee of Listed Companies (Shenzhen Ju Fa Zi (2004)) No.338) and the Circular of Regulating External Guarantees provided by Listed Companies (Zheng Jian Fa( 2005) No.120 Document), we audited the external guarantees provided by the Cmpany with responsible attitude. We hereby make the following statement: In the report period, the Company did not provide any guarantee except providing guarantee with total amount of RMB 12 million to its controlled subsidiaries. In our opinion, the Company regulated external guarantee and controlled the riskof external guarantee strictly according to the Artiles of Association of the Company. The guarantee provided by the Compamy to its controlled subsidiaries in the report period was demanded by the Company’s production and operation and rational utilization of funds. The decision-making procedure of guarantee was legal and reasonable and the interests of the Company and its shareholders, especially middle and small shareholders, were not harmed. 3.In the report , the newspapers selected by the Company for information disclosure were Securities Times and Hongkong Commercial Daily. VIII. Report of the Supervisory Committee In the report period, the supervisory committee of the Company duly performedits supervision duties and carried out effective supervision strictly according to the provisions of the Company Law and the Articles of Association of the Company. 28 （I）In the report period, the current supervisory committee held nine meetings： 1. On February 3, 2008, the 7th meeting of the fourth supervisory committee examined and adopted the proposals submitted by the board of directors to the first provisional shareholders' general meeting of the Company in 2008. 2.On April 18,2008 the 8th meeting of the fourth supervisory committee examined and adopted the proposals including the concerning the report of the supervisory committee of the Company for 2007,Final accounting report of the Company for 2007, Profit Distribution Preplan of the Company for 2007 ,2007 Annual Report of the Company and its Summary. and The First Quarterly Report 2007 . 3. On July 7, 2008, The 9th meeting of the fourth board of directors examined and adopted the proposal for applying to Bank of China for credit line. 4. On July 18,2008 The 10th meeting of the fourth board of directors examined and adopted the statement on special activities of corporate governance. 5. On August 11, 2008 ,The 11th meeting of the fourth board of directors examined and adopted 2008 semiannual report of the Company and its summary. 6. On September 23, 2008, The 12th meeting of the fourth board of directors examined the procedure of appointment of the Company's deputy general managers by the board of directors. 7. On October 20,2008，The 13th meeting of the fourth board of directors examined the proposal concerning the Company's participation in competitive bidding for land use right of Longgang Great Industrial Zone. 8. On October 24, 2008，The 14th meeting of the fourth board of directors examined and adopted the report of the Company for the third quarter of 2008. 9.On December 12, 2008，The 15th meeting of the fourth board of directors examined the assignment of equity of Shenzhen Fengsheng Garment Co., Ltd. and Jiangxi Xuanli Yarn Industry Co., Ltd., liquidation of Shenzhen Jingguang Footwear Co., Ltd., provision of guarantee to Shenzhen Beauty Century Garment Co., Ltd., exclusion of Shenzhen Shenfang Lekai Photoelectronic Materials Co., Ltd. out of consolidation scope for consolidated financial statements, sale of shares of Shenzhen Victor Onward in market, disposal of long-term investment in Shenzhen Fenghua Woven Tape Factory and current accounts. （II）Opinions of the supervisory committee on other matters 1.The operation of the Company according to law：In the report year,themembers of the supervisory committee attended all board meetings of the Company as nonvoting delegates, In the opinion of the supervisory committee, the Company constantly improved and implemented internal control system, the decision-making procedures were standardized and legal, the directors and members of the management of the Company worked diligently and practiced self discipline, the Company operated normally and completed share holding structure reform. No act of violating laws and regulations or the Articles of Association of the Company or harming the interests of the Company. 2.The inspection of the Financial affair of the Compamy: In the opinion of the supervisory committee, the Company strictly implemented national finance laws and regulations and its financial statements were complete and truthful. 3.The Compamy neither raised funds nor was involved in qcquisition activities in the report period. 29 4. The asset assignment by the Company in the report period: For the asset assignment occurred in the report period, the Company strictly carried out statutory examination and approval procedure and performed obligation of information disclosure and did not violate laws or regulations. 5. In the report period, The Company was not involved in any importance Related transactions. IX. Important Events （I）Importance lawsuits and arbitration 1.The Company was not involved in any Importance lawsuit or arbitrationin the report period. 2.Other lawsuits： The case that the Company sued Chengdu Gangpeng Real Estate Development Co., Ltd. ("Chengdu Gangpeng Co.) in respect of debts was officially placed by Sichuan Higher People's Court on file on September 3, 2007 (Refer to No. 2007-24 announcement of the Company). On November 9, 2007, Sichuan Higher People's Court ended the case through mediation. The Company and Chengdu Gangpeng Col. entered into a reconciliation agreement(Refer to No. 2007-33 announcement of the Company). As Chengdu Gangpeng Co. failed to refund payment of RMB 20.7830 million for house and interest accrued to the Company within the time specified in the agreement, the Company applied to Sichuan Higher People's Court for enforcement in respect of dispute on the commercial house contract involving Chengdu Gangpeng Co. On November 29, 2007, the Company received the notice of accepting case enforcement from Sichuan Higher People's Court. At present, this enforcement application is being handled(Refer to No. 2007-36 announcement of the Company). In June 2008, the Company received RMB 22.6830 million for case enforcement transferred by Sichuan Dazhou Intermediate People's Court, including interest of RMB 2 million(Refer to No. 2008-13 announcement of the Company). In September 2008, the Company received the remaining interest of RMB 5,117,813.00 transferred by Sichuan Dazhou Intermediate People's Court after the enforcement of the case (Refer to 2008-21 Announcement of the Company). So far, the Company's claim in this litigation has been fully satisfied. （II）Acquisition and disposal of assets, takeover and merger On February 22, 2008, the first provisional shareholders' general meeting of the Company in 2008 examined and adopted the Proposal for Assigning the Company's Assets. The meeting approved the assignment of the use right of the land of the Company located in Nanling Village, Nanwan Subdistrict, Longgang District, Shenzhen to the Community Resident's Committee of Nanling Village, Nanwan Subdistrict, Longgang District, Shenzhen. The assignment price is RMB 35.6725 million. The main purpose of this asset assignment is to invigorate assets and effectively integrate resources and does not involve the change in the Company's stock rights and high-ranking personnel (Refer to 2008-04 and 2008-06 announcement of the Company). In the report period, the said assignment was normally implemented according to the agreement. After deduction of income tax, the Company's actual net income from this asset assignment is RMB 12.80 million. The Company neither acquired nor disposed of assets nor was involved in any takeover 30 or merger in the report period. （III）The shares of other listed companies held by the Company： The company holds 22,279,487shares of Shenzhen Victor Onward Textile Industrial Co., Ltd. Listed at Shenzhen Stock Exchange (stock code:000018, hereinafter referred to as “ Shenzhen Victor Onward”), which account for 13.17% of the total share capital of Shenzhen Victor Onward. Exccpt these shares, 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. After the market closed on December 31, 2008, the Company accumulatively hold 6,561,628 shares of Shenzhen Victor Onward held by it through the trading system of Shenzhen Stock Exchange, which account for 3.88% of the total share capital of Shenzhen Victor Onward. The remaining 15,717,860 shares of Shenzhen Victor Onward account for 9.29% of the total share capital of Shenzhen Victor Onward, (including 10,352,609 negotiable shares not subject to sale restriction), total shares of Shenzhen Victor Onward. 5,365,251 shares were accounted for as shares for long-term investment. The initial investment cost is RMB 6,417,043.51. At the end of the report period, the book value of the investment was RMB 6,417,043.51. 10,352,609 shares were accounted for as financial assets available for sale. The initial investment cost is RMB 12,319,604.71. At the end of the report period, the book value of the investment was RMB41,203,383.82. （IV）Important Related transactions The Company was not involved in any important related transaction in the reportperiod. Refer to the financial report for the details of other related transactions. （V）Important contracts and their performance 1.Trust, contracting and lease The neither acquired nor disposed of trust, contracting and lease in the report period. 2.Significant guarantee In the report period, The Company provided two guarantees with total amount of RMB 12 million for bank line to Shenzhen Beauty Century Garment Co., Ltd., a wholly-owned subsidiary. The guarantee period is respectively from December 23, 2008 to December 22, 2009 and from December 26, 2008 to December 25, 2009. In addition, the company no other Guarantee. 3.Entrustment of cash asset management The Company did not entrust others to manage its cash assets in the report period. （VI）Commitments In the report period, Shenzhen Investment Management Co., Ltd., an original shareholder holding non-negotiable shares of the Company, made the following commitment during share holding structure reform: 1.The shares of the Company held by Shenzhen investment Management Co., Ltd.will not be listed or traded within at least 24 months from the date of obtaining the right of listing and negotiation. Within 12 months after the expiration of the said commitment period, the proportion of the number of the original non-negotiable shares sold by it through Shenzhen Stock Exchange to the total number of shares of Shenzhen Textile shall not exceed 5%. 2.Shenzhen Investment Management Co., Ltd.will bear the expenses related to this share 31 holding structure reform including financial consultation fee, sponsoring fee, lawyers’ fee, communication and recommendation fee and media publicity expenses, At present, the above commitments are under fulfillment. At the end of the report period, the quantity of negotiable shares not subject ot sale retriction held by the original shareholders holding non-negotiable shares who holde over 5% of total shares was 12,256,200 shares. （VII）Engagement and removal of certified public accountants The Company continued to engage Shenzhen Pengcheng Certified Public Accountants Co., Ltd. as its domestic audit body in the report period. The remuneration paid by Shenzhen Pengcheng Certified Public Accountants to the above ceitified publicin the report was respectively RMB 0.42 million, including traveling expenses. So far, Shenzhen Pengcheng Certified Public Accountants has provided services to the Company for 8 consecutive years. （VIII）Table for investigation, communication , interviewor other activities In the report period, the Company strictly abode by the principle of fair information disclosure in the work concerning relationship with investors according to the requirements of Guidelines for Fair Information Disclosure of Listed Companies. The Company communicated with investors in respect of its daily operation and development prospect with public materials including periodical reports and relevant announcements and did not selectively and privately disclose, reveal or divulge non-public significant information to specific objects. Information disclosure was fair. In the report period, no institutional investors came to investigate or interview the Company. The Company answered over 50 calls of personal investors. The Company communicated with the investors mainly in respect of the Company's operating status and development prospect, the controlling shareholder's support to the Company's business development and temporary suspension of listing of the Company. Table for investigation, communication , interviewor other activities Reception Reception Reception Reception Discussion issue and offered date plane Mode Object information 1.1-12.31 The Tel Individual Operating status and Company Investement development prospect of the Company, the controlling shareholder's support to the Company's business development, etc. （IX）Supervision over the the Company its directors and senior executives The Company and its directors and senior executives were not investigated by CSRC, administratively punished or publicly criticized by CSRC or publicly condemned by stock exchange in the report period. X Subsequent events (I)On February 9, 2009, the 16th meeting of the fourth supervisory committee of the Company approved the letter of resignation from the position of supervisor submitted by supervisor Deng Kangcheng as a result of work change and recommended Li Wei as a candidate for supervisor for election at shareholders' general meeting of the Company. The 32 meeting resolutions were published on Securities Times and Hong Kong Commercial Daily on February 10, 2009. (II) After the market closed on March 25, 2009, the Company accumulatively sold 8,457,118 shares of Shenzhen Victor Onward held by it through the trading system of Shenzhen Stock Exchange, which account for 5% of the total share capital of Shenzhen Victor Onward. The remaining 13,822,369 shares of Shenzhen Victor Onward account for 8.17% of the total share capital of Shenzhen Victor Onward, including 8,457,118 negotiable shares not subject to sale restriction which account for 5.00% of the total share capital of Shenzhen Victor Onward. XI. Financial Report (I)Auditor's report (attached I) (II)Financial statements (attached II) (III)Notes to financial statements (attached III) (IV) Summary Statement of Fund Occupation by the Controlling Shareholder and Other Related Parties (attached IV) XII. List of Documents available for Inspection (I)Financial statements bearing the seal and signature of legal representative and financial controller. (II)The original of the auditor’s report bearing the seal of the certified public accountants and the signature of C.P.A. (III)The originals of all the Company’s documents and the original manuscripts of announcements publicly disclosed on the newspapers designated by China Securities Regulatory Commission in the report period. The above documents were completely placed at the Office of the Company. This Report has been prepared in both Chinese and English. In case of any discrepancy, the Chinese version shall prevail. The Board of Directors of Shenzhen Textile (Holdings) Co., Ltd. March 26, 2009 33 Attachued I: Auditor’s Report Shen Peng Suo Gu Shen Zi ]No[2009]046.. To all shareholders of Shenzhen Textile (Holdings) Co., Ltd.： We have audited the accompanying financial statements of Shenzhen Textile(Holdings) Co., Ltd.. which comprise the consolidated balance sheet as December 31, 2008, and the consolidated income statement , cash flow statement, statement of changes in equity and Notes to Financial Statement in 2008. I. Management’s responsibility for the financial statement Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards. This responsibility includes: (1) Designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; (2) selecting and applying appropriate accounting policies; (3)and making accounting estimates that are reasonable in the circumstances. II. Auditor’s responsibility Our responsibility is to express an opinion on these financial statements has on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statement, whether due to fraud or error. In making those risk assessments, the auditors considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates make by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide basis for our audit opinion. III. Opinion In our opinion, the financial statements present fairly, in all material respects, the financial Rule of Shenzhen Textile (Holdings) Co., Ltd. As of December 31, 2008, and of its financial performance and its consolidated cash flows for the year then ended in accordance with international Financial Reporting Standards. Shenzhen Pengcheng Certified Public Accountants Co., Ltd. Chinese C.P.A Shenzhen China Hao Shiming March 25, 2009 Chinese C.P.A. Wu Cuishi 34 Attachued II: Shenzhen Textile (Holdings) Co., Ltd. Consolidated Balance sheet Unit：RMB Assets Note December 31,2008 December 31,2007 Current assets Monetary funds VII.1 84,022,925.18 124,908,748.97 Trading financial assets - - Bill receivable VII.2 700,000.00 500,000.00 Account receivable VII.3 5,927,101.61 45,900,339.22 Prepayments VII.5 10,320,610.92 12,923,615.58 Interest receivable - - Dividend receivable - - Other receivable VII.4 31,869,860.76 22,607,747.17 Inventories VII.6 12,169,064.23 44,384,315.38 Non-current asset due in 1 year - - Other current assets - - Total of current assets 145,009,562.70 251,224,766.32 Non-current assets： Disposable financial asset VII.7 41,203,383.82 21,573,000.00 Expired investment in possess - - Long-term receivable - - Long term share equity investment 151,494,911.40 93,317,118.10 Less: Bad debts Prepared of Long term share equity investment 38,883,699.49 38,444,292.11 35 Long term share equity investment VII.8 112,611,211.91 54,872,825.99 Property investment VII.9 142,816,259.43 146,474,909.43 Fixed assets VII.10 83,916,970.31 181,694,810.68 Construction in progress VII.11 30,646,285.87 4,959,719.40 Engineering material - - Fixed asset disposal - - Production physical assets - - Gas & petrol - - Intangible assets VII.12 5,914,236.00 12,223,128.44 R & D petrol - - Goodwill VII.13 - 2,249,587.82 Long-germ expenses to be amortized VII.14 1,038,191.17 1,597,591.75 Differed income tax asset VII.15 2,634,987.56 3,686,797.73 Other non-current asset - - Total of non-current assets 420,781,526.07 429,332,371.24 Total of assets 565,791,088.77 680,557,137.56 (The accompanying notes form an integral part of financial statements) Legal representative： Person in change of accounting dept： Accounting Supervisor： 36 Shenzhen Textile (Holdings) Co., Ltd. Consolidated Balance Sheet（Con） Unit ：RMB Liabilities and owners’ Note December 31,2008 December 31,2007 equity Current Liabilities Short-term loans VII.16 46,000,000.00 105,612,393.54 Financial liabilities held for trading - - Bill payable - - Accounts payable VII.17 18,859,027.41 36,094,528.13 Advances from customers VII.18 11,475,644.76 5,106,386.43 Salaries payable to Staff VII.19 9,360,985.83 8,886,676.62 Taxes payable VII.20 1,657,766.12 1,943,947.68 Interests payable - - Dividends payable VII.21 5,000,000.00 10,000,000.00 Other payable VII.22 48,433,612.32 61,752,709.60 Non-current liabilities due in 1 year VII.23 - 210,000.00 Other current liabilities - - Total current liabilities 140,787,036.44 229,606,642.00 Non-Current liabilities: Long-term loan - - Bonds payable - - Long-term payable - - Special payable VII.24 2,000,000.00 2,000,000.00 Accrued liabilities - - Deferred income tax liabilities VII.25 5,776,755.82 3,336,929.28 Deferred income tax liabilities - - Other current liabilities 7,776,755.82 5,336,929.28 Other current 148,563,792.26 234,943,571.28 37 liabilities Shareholders’ Equity Share capital VII.26 245,124,000.00 245,124,000.00 Capital surplus VII.27 68,921,594.03 61,016,141.46 Less：Treasury stock - - Surplus reserves VII.28 30,499,588.38 26,179,878.63 Reserved profit VII.29 72,682,114.10 31,009,266.53 Total attributable to equity holders of the Parent Company 417,227,296.51 363,329,286.62 Minority interest VII.30 - 82,284,279.66 Total owners’ equity 417,227,296.51 445,613,566.28 Total liabilities and Owners’ equity 565,791,088.77 680,557,137.56 (The accompanying notes form an integral part of financial statements) Legal representative： Person in change of accounting dept： Accounting Supervisor： 38 Shenzhen Textile (Holdings) Co., Ltd. Consolidated profit Statement Year 2008 Unit：RMB Items Note Year 2008 Year 2007 I. Operating income VII.31 364,153,360.26 489,270,085.73 Including：Operating income 364,153,360.26 489,270,085.73 II. Operating cost 365,597,367.83 508,163,375.72 Including：Operating cost VII.31 292,272,889.04 384,889,425.06 Operating taxes and extras VII.32 3,567,356.45 3,992,060.63 Sales expenses VII.33 15,283,793.72 17,235,392.95 Administrative expenses VII.34 53,348,135.78 58,840,282.62 Financial expenses VII.35 3,844,910.11 7,283,913.49 Loss of devaluation of assets VII.36 -2,719,717.27 35,922,300.97 Add：Changing income of fair value - - Investment income VII.37 28,847,802.54 35,617,395.86 Including：Investment income on affiliated company and joint venture 127,157.17 -9,226,052.79 III. Operating profit 27,403,794.97 16,724,105.87 Add：Non-operating income VII.38 23,765,753.74 781,926.94 Less：Non-operating expenses VII.39 541,681.65 98,524.04 Including：Disposal loss of non-current assets 82,931.30 64,852.40 IV. Total profit 50,627,867.06 17,407,508.77 Less：Income tax expenses VII.40 6,414,975.98 5,441,318.26 V. Net profit 44,212,891.08 11,966,190.51 Net profit attributable to the Parent company 45,992,557.32 11,554,100.29 Minority shareholders’ equity VII.41 -1,779,666.24 412,090.22 VI. Earnings per share （i）Basic earning per share 0.19 0.05 （ii）Diluted earning per share 0.19 0.05 39 (The accompanying notes form an integral part of financial statements) Legal representative： Person in change of accounting dept： Accounting Supervisor： 40 Shenzhen Textile (Holdings) Co., Ltd. Consolidated Change in owners’ equities Year 2008 Owners’ Equity attributable to parent Company Items Practical capital Less:Shares collected Capital reserves in stock Surplus reserves Attributable profit Oth I. Balance at the end of last year 245,124,000.00 61,016,141.46 - 26,179,878.63 31,009,266.53 Add：Change of accounting policy - - - Correcting previous errors - - - - - II. Balance at the beginning of current year 245,124,000.00 61,016,141.46 - 26,179,878.63 31,009,266.53 III. Changed in the current year - 7,905,452.57 - 4,319,709.75 41,672,847.57 （i）Net profit - - - - 45,992,557.32 （ii）Gains losses accounted into owners’ equity directly - 7,905,452.57 - - - I. Change in fair value of sellable financial assets net - 7,905,452.57 - - - 2.Influence of change in other 41 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) - 7,905,452.57 - - 45,992,557.32 （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 - - - 4,319,709.75 -4,319,709.75 1.Providing of surplus - - - 4,319,709.75 -4,319,709.75 2.Allotment of the owners - - - - - - 3.Other - - - - - - （V）Internal transferring of owners’ equity - - - - - - 42 1.Capitalzing of capital reserves - - - - - - 2.Capitalzing of surplus resaves - - - - - - 3.Making up losses by surplus reserves - - - - - - 4.Other - - - - - - IV. Balance at the end of this term 245,124,000.00 68,921,594.03 - 30,499,588.38 72,682,114.10 Check - - - - Legal representative： Person in change of accounting dept： Accounting Supervisor： 43 Shenzhen Textile (Holdings) Co., Ltd. Consolidated Change in owners’ equities Year 2007 Owners’ Equity attributable to parent Company Items Practical capital Less:Shares collected Capital reserves in stock Surplus reserves Attributable profit Othe I. Balance at the end of last year 245,124,000.00 45,814,574.74 - 26,668,175.37 20,783,134.67 Add：Change of accounting policy - - - -1,888,581.03 72,315.86 Correcting previous errors - - - - - II. Balance at the beginning of current year 245,124,000.00 45,814,574.74 - 24,779,594.34 20,855,450.53 III. Changed in the current year - 15,201,566.72 - 1,400,284.29 10,153,816.00 （i）Net profit - - - - 11,554,100.29 （ii）Gains losses accounted into owners’ equity directly - 15,201,566.72 - - - I. Change in fair value of sellable financial assets net - 15,201,566.72 - - - 2.Influence of change in other 44 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) - 15,201,566.72 - - 11,554,100.29 （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 - - - 1,400,284.29 -1,400,284.29 1.Providing of surplus - - - 1,400,284.29 -1,400,284.29 2.Allotment of the owners - - - - - 3.Other - - - - - - （V）Internal transferring of owners’ equity - - - - - - 45 1.Capitalzing of capital reserves - - - - - 2.Capitalzing of surplus reserves - - - - - 3.Making up losses by surplus reserves - - - - - 4.Other - - - - - IV. Balance at the end of this term 245,124,000.00 61,016,141.46 - 26,179,878.63 31,009,266.53 Check - - - - Legal representative： Person in change of accounting dept： Accounting Supervisor： 46 Shenzhen Textile (Holdings) Co., Ltd. Consolidated cash flow statement Year 2008 Unit：RMB Items Note Year 2008 Year 2007 I.Cash flows arising from operating activities Cash received from sales of goods and supply of labor 385,500,544.44 495,038,341.00 Rebated taxes received 28,310,701.24 19,374,528.15 Other business related cash receipts 936,917.09 637,836.63 Subtotal of cash flow in from operating activity 414,748,162.77 515,050,705.78 Cash paid for purchase of goods and reception of labor services 311,269,387.80 394,667,958.63 Cash paid to and for employees 36,150,577.80 51,276,149.12 Taxes paid 18,932,858.50 17,849,472.60 Other business related cash payments VII.42 17,384,091.40 27,143,949.76 Subtotal of cash flow out from operating activity 383,736,915.50 490,937,530.11 Net cash flows arising from operating activities 31,011,247.27 24,113,175.67 II. Cash flow arising from investment activities Cash received from recovery of investment 5,973,755.65 47,657,925.26 Cash received from investment income 23,286,517.41 4,753,970.82 Cash received from disposal of fixed assets, intangible asset and other long-term assets 7,014,254.03 1,309,701.36 Proceeds from sale of subsidiaries and other operating units - 4,259,990.00 Other cash received relating to investment activities 29,036,871.73 563,161.89 Sub total of cash inflows 65,311,398.82 58,544,749.33 Cash paid for acquiring fixed assets, intangible assets and other long-germ assets 33,801,257.73 22,653,571.43 Cash paid at investment - 47 - Net cash received from subsidiaries and other operational units - 22,717,100.00 Other cash paid for investment activities 30,876,339.01 - Subtotal of cash outflow due to investment activities 64,677,596.74 45,370,671.43 Net cash flow generated by investment 633,802.08 13,174,077.90 III.Cash flow generated by financing Cash received as investment - - Including: Cash received as investment from minor shareholders - - Cash received as loans 46,000,000.00 105,612,393.54 Other financing –related cash received VII.43 - 30,000,000.00 Subtotal of cash inflow from financing activities 46,000,000.00 135,612,393.54 Cash to repay debts 105,822,393.54 73,260,000.00 Cash paid as dividend, profit, or interests 10,133,986.31 14,093,925.59 Other financing-related cash received VII.44 2,500,000.00 37,500,000.00 Subtotal of cash outflow due to financing activities 118,456,379.85 124,853,925.59 Net cash flow generated by financing -72,456,379.85 10,758,467.95 IV. Influence of exchange rate alternation on cash and cash equivalents -74,493.29 -2,000,124.71 V. Net increase of cash and cash equivalents -40,885,823.79 46,045,596.81 (The accompanying notes form an integral part of financial statements) Legal representative： Person in change of accounting dept： Accounting Supervisor： 48 Shenzhen Textile (Holdings) Co., Ltd. Parent Company Balance sheet Unit ：RMB Assets Note December 31, 2008 December 31,2007 Current assets Monetary funds 35,807,908.88 51,415,565.66 Trading financial assets - - Bill receivable - - Account receivable - - Prepayments 653,200.00 813,876.53 Interest receivable - - Dividend receivable - - Other receivable VIII.1 53,365,895.02 56,320,754.06 Inventories - - Non-current liabilities due in 1 year - - Other current liabilities - - Total current liabilities 89,827,003.90 108,550,196.25 Non-current assets Disposable financial asset 41,203,383.82 21,573,000.00 Expired investment in possess - - Long-term receivable - - Long term share equity investment 227,755,546.99 246,767,460.16 Less: Bad debts Prepared of Long term share equity investment 41,133,287.31 38,444,292.11 Long term share equity investment VIII.2 186,622,259.68 208,323,168.05 Property investment VIII.3 128,943,964.83 131,995,963.47 Fixed assets VIII.4 38,817,216.62 40,695,721.47 Construction in progress 30,646,285.87 2,121,510.58 Engineering material 49 - - Fixed asset disposal - - Production physical assets - - Gas & petrol - - Intangible assets 2,543,228.00 3,262,969.00 R & D petrol - - Goodwill - - Long-germ expenses to be amortized - - Differed income tax asset 2,642,228.06 2,413,729.54 Other non-current asset - - Total of non-current assets 431,418,566.88 410,386,062.11 Total of assets 521,245,570.78 518,936,258.36 (The accompanying notes form an integral part of financial statements) Legal representative： Person in change of accounting dept： Accounting Supervisor： 50 Shenzhen Textile (Holdings) Co., Ltd. Parent Company Balance sheet（Con） Unit：RMB Liabilities and owners’ equity Note December 31,2008 December 31,2007 Current Liabilities Short-term loans 34,000,000.00 84,000,000.00 Financial liabilities held for trading - - Bill payable - - Accounts payable 418,508.57 1,182,611.63 Advances from customers 639,024.58 784,038.57 Salaries payable to Staff 5,104,987.09 3,452,146.15 Taxes payable 346,846.03 4,116,038.61 Interests payable - - Dividends payable 5,000,000.00 10,000,000.00 Other payable 61,837,867.20 55,045,462.73 Non-current liabilities due in 1 year - - Other current liabilities - - Total current liabilities 107,347,233.47 158,580,297.69 Non-Current liabilities: Long-term loan - - Bonds payable - - Long-term payable - - Special payable - - Accrued liabilities - - Deferred income tax liabilities 5,776,755.82 3,336,929.28 Other non-current liabilities - - Total of Other non-current liabilities 5,776,755.82 3,336,929.28 Total liabilities 113,123,989.29 161,917,226.97 Shareholders’ Equity 51 Share capital 245,124,000.00 245,124,000.00 Capital surplus 68,921,594.03 61,016,141.46 Less：Treasury stock - - Surplus reserves 30,499,588.38 26,179,878.63 Reserved profit 63,576,399.08 24,699,011.30 Total attributable to equity holders of the Parent Company 408,121,581.49 357,019,031.39 Total owners’ equity 408,121,581.49 357,019,031.39 Total liabilities and Owners’ equity 521,245,570.78 518,936,258.36 (The accompanying notes form an integral part of financial statements) Legal representative： Person in change of accounting dept： Accounting Supervisor： 52 Shenzhen Textile (Holdings) Co., Ltd. Parent Company profit statement Year 2008 Unit ：RMB Items Note Year 2008 Year 2007 I. Operating income VIII.5 47,650,135.63 44,046,600.81 Less：Operating Cost VIII.5 5,208,404.33 2,951,175.77 Operating taxes and extras 2,195,015.99 2,134,743.85 Sales expenses 2,216,130.06 2,505,758.93 Administrative expenses 40,352,421.50 36,150,206.74 Financial expenses 3,190,646.24 4,337,022.99 Loss of devaluation of assets -2,299,147.69 17,954,548.87 Add：Changing income of fair value - - Investment income 27,854,370.25 41,026,981.79 Including：Investment income on affiliated company and joint venture 127,158.17 -9,226,052.79 II.Operating profit 24,641,035.45 19,040,125.45 Add：Non-operating income 23,250,259.58 230,513.93 Less：Non-operating expenses 300,000.00 - Including：Disposal loss of non-current assets - - III. Total profit 47,591,295.03 19,270,639.38 Less：Income tax expenses 4,394,197.50 3,297,519.55 IV. Net profit 43,197,097.53 15,973,119.83 V. Earnings per share （i）Basic earning per share 0.18 0.07 （ii）Diluted earning per share 0.18 0.07 (The accompanying notes form an integral part of financial statements) Legal representative： Person in change of accounting dept： Accounting Supervisor： 53 Shenzhen Textile (Holdings) Co., Ltd. Parent Company Change in owners’ equities Year 2008 Less: Shares in Items Practical capital collected Capital reserves stock Surplus reserves Attributable pro I.Balance at the end of last year 245,124,000.00 60,487,826.17 - 26,179,878.63 18,577,62 Add：Change of accounting policy - 528,315.29 - - 6,121,39 Correcting previous errors - - - - II. Balance at the beginning of current year 245,124,000.00 61,016,141.46 - 26,179,878.63 24,699,01 III. Changed in the current year - 7,905,452.57 - 4,319,709.75 38,877,38 （i）Net profit - - - - 43,197,09 （ii）Gains losses accounted into owners’ equity directly - 7,905,452.57 - - I. Change in fair value of sellable financial assets net - 7,905,452.57 - - 2.Influence of change in other owners’ equity of invested enterprises on equity basis - - - - - 54 3.Influence of income tax related to owners’ equity items - - - - - 4.Other - - - - - Total of (I) and (II) - 7,905,452.57 - - 43,197,09 （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 - - - 4,319,709.75 -4,319,70 1.Providing of surplus - - - 4,319,709.75 -4,319,70 2.Allotment of the owners - - - - - 3.Other - - - - - （V）Internal transferring of owners’ equity - - - - - 1.Capitalzing of capital reserves - - - - - 55 2.Capitalzing of surplus reserves - - - - - 3.Making up losses by surplus reserves - - - - - 4.Other - - - - - IV. Balance at the end of this term 245,124,000.00 68,921,594.03 - 30,499,588.38 63,576,39 Legal representative： Person in change of accounting dept： Accounting Supervisor： 56 Shenzhen Textile (Holdings) Co., Ltd. Parent Company Change in owners’ equities Year 2007 Unit:RMB Practical capital Less:Shares in Total of owners’ item collected Capital reserves stock Surplus reserves Attributable profit equity I.Balance at the end of last year 245,124,000.00 45,814,574.74 - 25,988,335.18 21,863,067.27 338,789,977.19 Add：Change of accounting policy - -528,315.29 - -1,208,740.84 -15,888,005.76 -17,625,061.89 Correcting previous errors - - - - - - II. Balance at the beginning of current year 245,124,000.00 45,286,259.45 - 24,779,594.34 5,975,061.51 321,164,915.30 III. Changed in the current year - 15,201,566.72 - 1,400,284.29 12,602,558.61 29,204,409.62 （i）Net profit - - - - 14,002,842.90 14,002,842.90 （ii）Gains losses accounted into owners’ equity directly - 15,201,566.72 - - - 15,201,566.72 I. Change in fair value of sellable financial assets net - 15,201,566.72 - - - 15,201,566.72 57 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) - 15,201,566.72 - - 14,002,842.90 29,204,409.62 （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 - - - 1,400,284.29 -1,400,284.29 - 1.Providing of surplus - - - 1,400,284.29 -1,400,284.29 - 2.Allotment of the 58 owners - - - - - - 3.Other - - - - - - （V）Internal transferring of owners’ equity - - - - - - 1.Capitalzing of capital reserves - - - - - - 2.Capitalzing of surplus reserves - - - - - - 3.Making up losses by surplus reserves - - - - - - 4.Other 9,120,000.00 - - - - 9,120,000.00 IV. Balance at the end of this term 245,124,000.00 60,487,826.17 - 26,179,878.63 18,577,620.12 350,369,324.92 Legal representative： Person in change of accounting dept： Accounting Supervisor： 59 Shenzhen Textile (Holdings) Co., Ltd. Parent Company cash flow statement Year 2008 Unit：RMB Items Note Year 2008 Year 2007 I.Cash flows arising from operating activities Cash received from sales of goods and supply of labor 48,390,550.17 43,262,516.94 Rebated taxes received - 222,556.24 Other business related cash receipts 13,201,150.75 13,835,708.72 Subtotal of cash flow in from operating activity 61,591,700.92 57,320,781.90 Cash paid for purchase of goods and reception of labor services 6,857,936.11 3,473,777.95 Cash paid to and for employees 13,145,646.63 11,993,746.23 Taxes paid 12,844,835.60 4,385,014.65 Other business related cash payments 14,791,511.09 46,410,536.69 Subtotal of cash flow out from operating activity 47,639,929.43 66,263,075.52 Net cash flows arising from operating activities 13,951,771.49 -8,942,293.62 II. Cash flow arising from investment activities Cash received from recovery of investment 5,973,755.65 47,494,906.58 Cash received from investment income 22,293,085.12 4,933,599.34 Cash received from disposal of fixed assets, intangible asset and other long-term assets 6,557,369.13 114,864.96 Proceeds from sale of subsidiaries and other operating units - 4,230,000.00 Other cash received relating to investment activities 28,553,205.72 891,831.58 Sub total of cash inflows 63,377,415.62 57,665,202.46 Cash paid for acquiring fixed assets, intangible assets and other long-germ assets 31,267,107.76 5,877,349.65 Cash paid at investment - - Net cash received from subsidiaries and other operational units - 22,717,100.00 Other cash paid for investment activities - - Subtotal of cash outflow due to investment activities 31,267,107.76 28,594,449.65 Net cash flow generated by investment 32,110,307.86 29,070,752.81 III.Cash flow generated by financing Cash received as investment - - 60 Cash received as loans 34,000,000.00 84,000,000.00 Other financing –related cash received - 30,000,000.00 Subtotal of cash inflow from financing activities 34,000,000.00 114,000,000.00 Cash to repay debts 84,000,000.00 68,000,000.00 Cash paid as dividend, profit, or interests 9,078,326.00 13,130,938.89 Other financing-related cash received 2,500,000.00 37,500,000.00 Subtotal of cash outflow due to financing activities 95,578,326.00 118,630,938.89 Net cash flow generated by financing -61,578,326.00 -4,630,938.89 IV. Influence of exchange rate alternation on cash and cash equivalents -91,410.13 -128,336.84 V. Net increase of cash and cash equivalents -15,607,656.78 15,369,183.46 (The accompanying notes form an integral part of financial statements) Legal representative： Person in change of accounting dept： Accounting Supervisor： 61 attached III: Shenzhen Textile (Holdings)Co., Ltd. Notes to financial statements Unit: RMB Note 1.Basic Information of the Company (1). History The company was previously the Shenzhen Textile Industry Company, on April 13, 1994, approved by the Letter(1114)No.15 issued by Shenzhen Municipal People's Government, the Company was restructured and named as Shenzhen Municipal Textile (Group) Co., Ltd. In the same year, approved by the (1994) No.19 file of Shenzhenshi, the shares of the company were listed in Shenzhen Stock Exchange. The Company has got the corporate business certification of Shensizi N246747, by December 31, 2008, the registered capital of the Company was RMB 245,124,000.00. Business scope of the Company: (2) The industries the Company belongs to Textile industry (3). Business Scope of the Company Manufacturing textiles, knitwears, garments, decorative cloth belts, trademark belts, bicycles, crafts, and special equipments for textile industry, textile equipments and accessories, meters, standard parts, leather products, textile raw materials, dyes, electronics, cereals, oils and food; in the range of obtaining lawful land use right, the Company also engaged in individual real estate development and management; organizing exhibitions; import and export trading business according to the regulations in Shenmaoguan Shenzhengzi No.034 File. (4) The main products or services of the Company Textiles, sales and housing rent (5). The reporting person of the approval of financial statements and the reporting date of the approval of financial statements. The reporting person of the approval of financial statements of the company: Board of Directors of the Company the reporting date of the approval of financial statements of the Company: March 25, 2009 Note 2. Basis for the preparation of financial statements On the basis of continuous operation, in accordance with actual transactions and events, the company carried out confirmation and measurement in accordance with "Accounting Standards for Business Enterprises - Basic Standards" issued by the Ministry of Finance and other various accounting standards, on the basis of it, the Company prepared the financial statements. Note 3. Statement on complying with corporate accounting standards The Company declared: the financial statements of the Company complied with "Accounting Standards for Business Enterprises" and its application guidelines and the relevant requirement in information 48 disclosure standards Quiz No. 7, and have truely, completely reflects the company's financial position, operation results, cash flow, and other relevant information. Note 4. Significant accounting policies, accounting estimates and early errors 1. Fiscal year A calendar year, that is, from January 1 to December 31 is a fiscal year. 2. Accounting standard money Accounting standard money is RMB. 3. Accounting basis and accounting measurement attribute Accounting basis: right &duty occurrence system; accounting measurement attribute: measured according to history costs, if the accounting elements can be reliably identified according to replacement cost, realizable net value, current value, fair value, they can be measured by the corresponding measurement attributes. 4. Method for foreign currency accounting (1). For the foreign currency business, it should be accounted according to the standard money accounted according to the spot rate. At the period end, adjust the foreign currency business according to the spot rate on the balance sheet date, all the exchange differences should be included in the current loss and gain accept that the business is relating to purchase and production of assets which meet the capitalization conditions. (2) The subsidiaries of the company whose standard currency was foreign currency, all asset and liability items should be converted into the standard money of parent company according to the spot rate on the balance sheet date, and all the owners’ equity items, accept for "retained profits", should be converted into the standard money of parent company according to the spot rate on the balance sheet date. The income and cost items in the profit statement should be converted into the standard money of parent company according to the spot rate during the period of consolidating financial statements. The conversion differences due to different exchange rate, should be reflected by opening the "foreign currency conversion difference statements" in RMB. And open the "foreign currency statements conversion differences" in cash flow statement in RMB. 5. Standards for determine cash equivalents Standards for determine cash equivalents are the investments which have short duration and strong mobility and are easy to be converted into cash and value. 6. Methods for accounting financial assets (1) Classification of financial assets: Financial assets can be divided into: the financial assets which measured by fair value and its changes are included in the current loss and gain (including transactional financial assets and the financial assets which measured by fair value and its changes are included in the current loss and gain), the expired investments, loans and receivables held, and financial assets to be sold, the four categories; (2) Measurement of financial assets A. The initial recognition financial assets are accounted in accordance with fair values. For the financial assets which measured by fair value and its changes are included in the current loss and gain, the relevant transactional costs should be included in the current loss and gain; for other financial assets, the relevant transactional costs should be included in the initial recognition amount. B. The Company makes follow-up measurement on financial assets according to fair value, the transactional cost to deal with the financial assets which may happen in the future will not be deducted. But, except the following situations: 49 (a). The expired investments, loans and receivables held, should be measured according to amortized costs by the actual interest method. (b). The equity tool investments which do not have quotation in market and their fair value can not be reliably measured, and the derivative financial assets which are related to the equity tool and are to be delivered to the equity tool to account, should be measured according to costs. (3) Determination of fair value of financial assets: A, The financial assets which exist in the market, the quotation in the market will be determined as fair value; B, The financial assets which do not exist in the market, adopt valuation techniques to determine the fair value. The results by the valuation techniques show the transaction prices which may be used in fair transactions on the valuation day. (4). Impairment of financial assets: On the balance sheet date, carry out inspection on the book value of financial assets which are not included in the financial assets measured according to fair value and its changes are include in the current loss and gain. If there are objective evidence showing that the financial assets have impairment, the provision for impairment should be accounted. The objective evidences which show the impairment of financial assets include the following items: A. The issuing party or the debtor had serious financial difficulties; B. The debtor violated the terms in the contract, such as the payment of interest or principal had default or delayed; C. For the consideration in economy and law, the Company made concessions to the debtor in difficulties; D. The debtor was likely to collapse or carry out other financial restructuring; E. The issuing party had major financial difficulties, and the financial assets can not be traded in market; F. The debtor had major adverse changes in technology, market, economic and legal environment, and the Company was may not be able to recover the investment costs; G. The fair values of the equity tool investments had serious and non-temporary decline; H. Other objective evidences which show the impairment of financial assets. (5). Measurement of impairment losses of financial assets: A. The financial assets measured according to fair value and its changes are include in the current loss and gain require no test of impairment; B. The measurement of impairment loss of expired investments: account provision for impairment according to the difference of the value of future cash flow lower than the book value; C. Measurement of impairment loss of receivables: if the amount is large, conduct individual impairment test, account provision for impairment according to the difference of the value of future cash flow lower than the book value; if small receivables and the receivables found no impairment after the individual test, account provisions for impairment according to the nature of the receivables by the method of account age, the proportions to be accounted according to account age are as follows: Age Proportion % Within 1 year 5% 1-2 years 10.00% 2-3 years 30.00% 50 Over 3 years 50.00% If the difference between the future cash flow of the receivable and its current value is small, when determine the relevant impairment loss, do not make discount on its future cash flow. D. Judgment of impairment of the financial assets for sale: if the fair value of the financial asset is decreasing continuously and the decline is not temporary, the occurrence of the impairment of the financial asset will be recognized. When the financial asset for sale had impairment, even if the asset is not finally determined, the accumulated loss, originally included in the owners’ equity and formed due to the decline of fair value should be converted out and included in the current loss and gain. The accumulated loss converted out can be the initial cost of the financial assets for sale deducting the amount recovered and the amount amortized, current fair value and the balance of the impairment loss originally included in loss and gain. 7. Accounting methods of inventory (1). Inventory classification Inventory can be divided into five categories: raw materials, materials commissioned to process, products, finished products, working materials; (2). Valuation and amortization of the inventory issued All inventories are priced according to their actual purchasing costs, when issue the inventory, adopt the weighted average method to valuate; the working materials will be amortized by the method of one-time amortization when they are issued. (3). Inventory system and methods for accounting provision for devaluation of inventory. Inventory system adopts the perpetual inventory method; at period end, on the basis of comprehensive checking on inventories, all or part of the damaged and old inventories, the part that the realizable value lower than the cost, the provision for devaluation of inventory should be accounted. The amount is determined according to the difference of the cost of individual inventory item higher the realizable net value. (4). Methods for determination of realizable net value of inventory. Realizable net value of inventory is determined according to the estimated selling price minus estimated cost, the estimated selling cost and relevant taxes. 8. Methods for accounting long-term equity investment (1). Long-term equity investment is accounted according to its initial investment cost; (2) According to different situations, the Company adopts the methods of cost and equity to account long-term equity investments; A. The long-term equity investment of the subsidiaries that have controlling right on the invested units, should be accounted by cost method in parent company, when prepare the consolidated statements, adjust it by equity method. If the parent uses the cost method to account, the current investment income should be determined when the company allocates profit or cash dividends; B. The long-term equity investments which have no joint control or significant influence on the invested unit, and have no quotation in market, and its fair value can not be reliably accounted, should be accounted by cost method, and the current investment income should be determined when the company allocates profit or cash dividends; C. The long-term equity investments which have joint control or significant influence on the invested unit, should be accounted by equity method; the net loss or gain realized from the invested unit at period end will be determined as the current investment income (when determine the net loss of the invested unit, 51 deduct the book value of the investment and the long-term equity of net investment in the invested unit, until zero); D. If the initial investment cost to obtain the long-term equity investment and its fair value of the identifiable net assets in the invested company have difference, and if the difference is in debit, the initial investment cost of the long-term equity investment will not be adjusted; if the difference is in credit, it should be included in the current loss and gain; for the long-term investment obtained from corporate merger under different controls, the difference between the merger cost and the fair value of identifiable net assets obtained from the merger, should be confirmed as goodwill or be included in the current loss and gain; (3). Provision for impairment of long-term equity investment The impairment of long-term equity investment should be treated according to regulations of asset impairment in 14. 9. Measurement model of investment property (1). Scope of investment real estate: refers to the real estate for rent or for capital appreciation or for both of them, including the rented land use rights, the land use rights held and to transferred, and the leased building; (2). Initial measurement of investment real estate: conduct initial measurement in accordance with the cost to obtain it; (3). Follow-up measurement of investment real estate: the Company conducts follow-up measurement on the investment real estate by cost model; the follow-up expenditure relating to investment real estate, if the related profit is likely to flow into the company and can be measured, then it should be included in the cost of the investment real estate, other follow-up expenditures should be recognized as the current loss and gain; (4) The classification, depreciation and amortization policies of real estate investments and the depreciation and amortization policies of fixed assets and intangible assets should be coherent. (5). Provision for impairment of investment real estate should be treated according to 14 Regulations for asset impairment. 10. Confirmation conditions, classification, measurement basis and impairment policy of fixed assets (1). Confirmation conditions of fixed assets The tangible assets held for producing goods, providing services, rent or operation, and the service time is longer than one fiscal year. (2). Measurement basis of fixed assets All fixed assets should be conducted initial measurement in accordance with the actual cost to obtain them. 52 (3). Classification and depreciation policy of fixed assets Depreciation of fixed assets uses the straight-line method, the accrued depreciation minus the net residual value (4.00% of the original value of the fixed assets), then account the devaluation by the classified depreciation rate. The classification of fixed assets, service life and year depreciation rate of fixed assets are as follows: Classification of fixed asset Service life（year） Year depreciation rate House and Building –Production 35 2.74% House and Building-Non- 40 2.40% Production Fixed assets decoration 10 10.00% Machinery and equipment 10-14 9.60%-6.86% Transportation equipment 8 12.00% Electronic Equipment 8 12.00% Other 8 12.00% At the end of each year, conduct review on service life, predicted net residual and depreciation methods of the fixed assets. If the predicted service life is different from the originally estimated service life, adjust the service life of the fixed assets; if the predicted net residual amount is different from the originally estimated amount, adjust the predicted net residual value. (5) Provision for impairment of investment real estate should be treated according to 14 Regulations for asset impairment. 11. Methods for accounting projects under construction, Methods for accounting provision for impairment of projects under construction. (1). Methods for accounting projects under construction. The projects under construction include pre-construction preparations, the building projects under construction, installation projects, technical transformation projects and overhaul works, etc. The projects under construction should be accounted according to actual expenditures by items, and should be converted to fixed assets when the projects reached the predicted use state. The costs for borrowing relating to projects under construction (including loan interests, excess discount amortization, exchange gains and losses, etc.), which should be included in the cost before the related projects reach the predicted use state, and included in the current financial cost after the related projects reach the predicted use state; (2). Provision for impairment of investment real estate should be treated according to 15 Regulations for asset impairment. 12. Valuation of intangible assets and amortization policy (1). Intangible asset refers to the non-monetary assets owned or controlled by a company with no 53 identifiable physical forms, including proprietary technology, right to use land; (2). Intangible asset is valuated according the actual cost to obtain it; (3). For the intangible assets with definite service life, since the availability of the intangible assets, they should be amortized by straight-line method within the service life, and included in the current loss and gain; the intangible assets with no definite service life will not be amortized; the company should conduct review on the service life and amortization methods of the intangible assets at the end of the year, if the service life and amortization methods are inconsistent with what estimated previously, then the amortization period and amortization methods should be changed. (4). Provision for impairment of investment real estate should be treated according to 14 Regulations for asset impairment. 13. Amortization policy of long-term deferred expense (1). Long-term deferred expenses refer to all the expenses which should be amortized in the current period and in the future periods and the amortization period is longer than one year; (2). Long-term deferred expense is valuated according to actual cost, the installation cost should be equally amortized during two major overhauls or the contract period (depends on which is shorter), other long-term deferred expenses should be equally amortized according to the benefit period of the project. For the long-term deferred expenses which can not bring predicted profit in the future accounting period, all the unamortized value should be converted to the current loss and gain. 14. Basis and methods for accounting provision for impairment of assets (1). Scope of impairment testing At the end of the reporting period, impairment tests should be conducted on the goodwill formed from corporate merger and the uncertain intangible assets regardless of whether there are indications of impairment. In addition, impairment tests should be conducted on the following assets which there are indications of impairment: A. The market value of assets decreased significantly in the current period, the decline was significantly higher than the normal decline. B. The economic, technical or legal environments of the company the market of the assets may have major changes in the current period or in near future, which have an adverse impact on the company. C. Market interest rates or other market return rates of in the current period has raised, thus affect the company to account assets and to predict the discounting rate of future cash flow value, thus resulting in significant reduction in the amount of recoverable assets. D. If there is evidence showing that the assets have been outdated or actually has been damaged. E. The assets have been or will be idled, ended to use or planned to dispose ahead of schedule. F. There is evidence of internal report showing that economic performance of the assets has been or would be lower than what expected, for example, the net cash flow created by assets or the operating profits realized (or losses) are far below (or above) the estimated amount. G. Other indications showing the signs of impairment. (2). Recognition of asset impairment loss. Asset impairment loss is determined according to the difference of the expected recoverable amount of 54 assets lower than their book values. (3). Methods for determination of expected recoverable amounts Either the net amount of fair value of assets minus disposal costs or the current value of predicted future cash flow will be determined as the recoverable amount, depending on which is higher. (4) If there are indications showing the possible impairment of an asset, its recoverable amount should be estimated by basing on the individual asset. If the recoverable amount is hard to estimate, the asset group the asset belongs to will be the basis to determine the recoverable amount of the asset group. 15. Method for accounting financial liabilities (1) Classification of financial liabilities Financial liabilities can be divided into: the financial liabilities which measured by fair value and its changes are included in the current loss and gain (including transactional financial liability and the financial liability which measured by fair value and its changes are included in the current loss and gain), and other financial liability; (2) Measurement of financial liabilities A. The initial recognition of financial liability is accounted in accordance with fair values. For the financial assets which measured by fair value and its changes are included in the current loss and gain, the relevant transactional costs should be included in the current loss and gain; for other financial liabilities, the relevant transactional costs should be included in the initial recognition amount. B. The Company makes follow-up measurement on financial assets according to method of actual interest, but, except the following situations: (a).The financial liability measured by fair value and its changes are included in the current loss and gain, should be measured according to fair value, but the transactional cost may happen in the future to settle the financial liability will not be deducted. (b). The equity tool which do not have quotation in market and their fair value can not be reliably measured, and the derivative financial liabilities which need to deliver the equity to settle, should be measured according to their costs (c).The financial guarantee contracts of financial liabilities which are measured by fair value and its changes included in the current loss and gain, or the loan commitments which are not measured by fair value and its changes included in the current loss and gain, follow-up measurement should be conducted according to which is higher in the following two items after the initial confirmation: ① the amount determined in accordance with "Accounting Standards for Business Enterprises No. 13 – contingent events"; ② the balance of the initial confirmation amount deducting the cumulative amortized amount determined in accordance with "Enterprise Accounting Standard No. 14 - income". 16. Method for accounting of predicted liabilities (1). The liabilities which are relevant to contingent events and meet the following conditions at the same time, the Company recognizes it as predicted liabilities: the liability is the current obligation the company undertakes; the performance of the liability may result in the outflow of economic interests; the amount of the liability can be reliably measured; (2). If the predicted liability to be fully or partly paid by the company and be compensated by the third party, the compensation amount can be recognized as assets individually only when it can be basically recovered, at the same time, the compensation on the asset should not be more than the corresponding book amount of the predicted liability. 17. Principle for revenue recognition (1). Revenue from goods sale 55 After the risks and rewards of the goods are transferred to the buyer, the company will no longer conduct the management right and the actual control right, and the relevant incomes have been received or the documents of receiving have been obtained, and the cost of the goods can be reliably measured, the realization of the revenue should be confirmed. (2). Revenue from service In the same fiscal year and the service has been completed, the income should be confirmed upon the completion of the service; If the starting and completion of the service belong to different fiscal year, then when the service can be reliably measured, the service income should be confirmed at the period end according to the percentage of the service not completed. (3). Incomes from transferring asset use right. Incomes from transferring asset use right include interest income and income from use payment; The amount of interest income, is determined in accordance with the time and actual interest rate; the income from use payment is determined according to the time and method of relevant contract and agreement. 18. Method for accounting of borrowing costs (1). The borrowing expenses, if they comply with the capitalization conditions, should be capitalized and included in the cost of relevant assets; other borrowing expenses, should be determined according to the amount occurred and be included in the current loss and gain. If the borrowing expenses meet the following conditions at the same time, they should be capitalized: A. Capital expenditures have already occurred, capital expenditures include the expenditures paid by cash, transferring non-cash assets or by bearing interest-debt; B. The borrowing costs have occurred; C. The construction to make the asset to reach the intended use state or sale state, or the production activities have already begun. (2). When the assets which meet the capitalization condition reach the intended use or sale state, the capitalization of the borrowing expenses should be stopped. The borrowing expenses for the assets which meet the capitalization conditions and reach the intended use or sale state, the expenses should be confirmed according to the amount occurred, and be included in the current loss and gain. 19．Enterprise merger （1）Enterprise merger under same control For the enterprise merger under same control, the assets and liabilities obtained by the merging party from enterprise merger was measured according to book value of the merged party on the merger date. The capital reserve was adjusted according to the deference between the book value of net assets obtained by the merging party and the book value of merger price paid (or the total book value of shares issued); if capital surplus was not big for the offset, the retained earnings should be adjusted. （2）Enterprise merger under different control For the enterprise merger under same control, the merger cost was the assets for the obtaining the control right of the party being purchased on the purchase date, the liabilities happened or undertook and the fair value of the equity securities. For the enterprise merger realized through a number of transactions, the merger cost was the sum of all individual transaction. All the direct costs and related costs for the enterprise merger were included in the cost of enterprise merger. The purchase date referred to date that the company had the control right of the party being purchased. The difference between merger cost over the fair value of identifiable net value obtained from the merger should be confirmed as goodwill. The difference between the identifiable net assets of the party being purchased obtained in the merger and the amount of identifiable net assets of the party being purchased obtained in the merger should be included in the loss and gain of the current period. 20. Accounting treatment methods of income tax The accounting treatment of income tax of the company should adopt the method of balance sheet. If the book value of the asset is smaller than its tax basis or the book value of the liability is bigger its tax basis, the deterred income tax asset produced should be confirmed; If the book value of the asset is bigger than its tax basis or the book value of the liability is smaller its tax basis, the deterred income tax liability produced should be confirmed; 21. Methods for the compilation of consolidated financial statements (1) The consolidated financial statements should be based on the financial statement of the subsidiaries 56 included in the consolidated financial statement and other relevant data, the long-term equity investment of the subsidiary should be adjusted according to the equity methods, all the investments and transactions of the subsidiary included in the consolidated financial statement should be offset completely, and compiled by accounting loss and gain of minority shareholders and equity of minority shareholders. (2). Upon the consolidation, if the accounting policy of the subsidiaries and the company are inconsistent, it should be compiled according to the accounting policy of the company. 22. Principal accounting policies, estimates and errors of previous period (1) As Shenzhen Shenfang Lekai Photoelectronic Materials Co., Ltd., Anhui Huapeng Textile Co., Ltd. and Shenzhen Jingguang Footwear Co., Ltd. fell out of consolidation scope as mentioned in Note VI (2), long-term equity investment was accounted for on basis of equity instead of cost and retained earnings of the parent company at beginning of period was retroactively adjusted by RMB 6,121,391.18. According to relevant provisions of contracting agreement, the book cost of long-term investment in Anhui Huapeng Textile Co., Ltd. accounted for on equity basis at beginning of current period was accounted for as initial investment cost and this long-term investment was continuously accounted for on cost basis. Shenzhen Jingguang Footwear Co., Ltd. has entered liquidation procedure. The book cost of long-term investment in this company accounted for on equity basis at beginning of current period was accounted for as initial investment cost and this long-term investment was continuously accounted for on cost basis. The said change does not affect the consolidated retained earnings at beginning of period and year 2007 consolidated profit; (2) Except the above-mentioned, there are no other change of accounting policies and accounting estimate and significant errors for the previous period. Note 5. Taxes of the Company Taxes Tax references Applicable tax rates VAT Incomes from product sales 13.00%,17.00% Providing labor services, real estate sales, Business tax. 3.00%,5.00% the transfer of intangible assets City construction tax VAT, sales tax, turnover tax, etc 5.00%,1.00% Business income tax Taxable income 18.00% Note 6. Consolidation scope of the Company 1. Important information of subsidiaries. Company names Regis Registered Proportio Main businesses tered capital n Place Shenzhen Jinlan Decorative Shen 4,000,000.00 100.00% Furnishing fabrics, bedding, Articles Industrial Co., Ltd. zhen clothing 57 Shenzhen Lisi Industrial Co., Ltd Shen 2,360,000.00 100.00% Domestic business, material zhen supply and marketing industry Shenzhen Huaqiang Hotel. Shen 10,005,300.00 100.00% Accommodation, restaurants, zhen business centre Shenfang Property Management Shen 1,604,000.00 100.00% Property management Co., Ltd. zhen Shenzhen Beauty Century Garment Shen 25,000,000.00 100.00% produce full electronic Co., Ltd. zhen jacquard molding knitted apparel Shenzhen Zhongxing Fibre Folds Shen 1,680,000.00 75.00% Acupuncture cloth, and Cotton Clothing Ornament Co., zhen fusible Interlining products Ltd. Jiangxi Xuanli Yarn Industry Co., Jiang 20,000,000.00 63.87% produce and operate Ltd. xi man-made fibers, color embroidery threads Shenzhen Shenfang Import and Shen 5,000,000.00 100.00% Operate import and export Export Co., Ltd. zhen businesses Shenzhen Tianglong Industry and Shen 1,900,000.00 81.93% Operate import and export trade Co., Ltd. zhen businesses 2. Change of consolidation scopes in the current period (1). The equity structure of Shenzhen Shenfang Lekai Photoelectronic Materials Co., Ltd. changed. Though the Company still holds 47.95% equity, it is no longer the largest shareholder of this company. From January 1, 2008, this company fell out of the consolidation scope for consolidated financial statements; (2) The operation of Anhui Huapeng Textile Co., Ltd. was contracted by another party from January 1, 2008. The Company lost control over it in the contracting period. From January 1, 2008, this company fell out of the consolidation scope for consolidated financial statements; (3) As Shenzhen Jingguang Footwear Co., Ltd. entered the liquidation procedure from May 9, 2008, this company fell out of consolidation scope for consolidated financial statements from this day; (4) Shenzhen Tianlong Industrial and Trading Co., Ltd. is a limited liability company jointly established by Shenfang Group and Baoding Swan Chemical Fiber Group Co., Ltd. on January 1, 1984. Its registered and paid-up capital is RMB 1.9 million. Each party holds 50% equity. The Company's investment in this company shall be accounted for on equity basis. On August 27, 2001, Baoding Swan Chemical Fiber Group Co., Ltd. and Jiangxi Xuanli Yarn Industry Co., Ltd, a subsidiary of Shenfang Group, signed an agreement. According to the agreement, Baoding Swan Chemical Fiber Group Co., Ltd. 58 transferred 50% equity of Shenzhen Tianlong Industrial and Trading Co., Ltd. held by it to Jiangxi Xuanli Yarn Industry Co., Ltd. with the compensation of RMB 1.00, After assignment, Shenfang Group controlled Shenzhen Tianlong Industrial and Trading Co., Ltd. through direct and indirect equity holding. As the proportion of income, net profit and net assets of Shenzhen Tianlong Industrial and Trading Co., Ltd. before 2007 to those of the Group is small, it fell out of consolidation scope according to old standards. In 2007, this company did not fall into consolidation scope after the Company implemented new standards for the first time. This error affected profit for 2007 by RMB 200,750.21 and affected net assets by RMB 213,248.14. As this matter has small influence on the reports of the Company in the previous periods, the Company did not treat it as significant accounting error. With the method of application in the future adopted, this company fell in the consolidation scope for 2008. 3. Information on the subsidiaries not included in the merger Name of affiliated Registe Registered capital Share Main businesses Reasons for not company red holding consolidation Place ratio Hongkong Dahong Hongko HKD10,000.00 100.00 Import and Bas entered International Co., Ltd. ng % export trade liquidation proceedings Shenzhen Fengsheng Shenzh HKD6,670,000.0 100.00 Various fabrics The Company Garment Co., Ltd. en 0 % for garments, had lost the fabrics and actual control materials right Anhui Huapeng Textile Anhui RMB 50,000,00 50.00% Yarn Contracted and Co., Ltd. 0.00 production, operated by other bleaching, parties printing, dyeing processing and marketing Shenzhen Jingguang Shenzh RMB 100.00 All kinds of Bas entered Footwear Industry Co., en 7,200,000.00 % socks and sports liquidation Ltd. shoes proceedings Note 7. Statement of major events in consolidated financial statements 1. Currency funds Items 2008-12-31 2007-12-31 Excha Exchan nge Original currency ge rate RMB Original currency rate RMB I. Cash RMB 130,983.59 1.00 130,983.59 251,947.41 1.00 251,947.41 59 Items 2008-12-31 2007-12-31 Excha Exchan nge Original currency ge rate RMB Original currency rate RMB HK$ 54,478.42 0.84 45,996.54 108,576.31 0.94 102,008.27 USD 18,009.13 6.61 119,047.96 20,317.21 7.30 148,315.63 Subtotal --- --- 296,028.09 --- --- 502,271.31 II.Bank deposit RMB 79,374,291.39 1.00 79,374,291.39 95,019,303.32 1.00 95,019,303.32 HK$ 124,026.99 0.84 104,182.67 3,723,930.38 0.94 3,487,511.65 USD 4,874,448.68 1,001.20 6.61 6,617.95 667,305.20 7.30 EUR 0.85 11.15 9.48 Subtotal --- --- 79,485,101.49 --- --- 103,381,263.65 III. Other capital RMB 4,241,795.60 1.00 4,241,795.60 17,322,752.95 1.00 17,322,752.95 USD 125,268.00 7.30 915,032.63 Japanese Yen 43,485,623.00 0.06 2,787,428.43 Subtotal --- --- 4,241,795.60 --- --- 21,025,214.01 Total --- --- 84,022,925.18 --- --- 124,908,748.97 (1). Currency fund increased more than that of last period, mainly due to the sale of available-for-sale financial assets and recovered large amounts of funds. (2). There were no other funds that have potential risks from mortgage or freezing in the year balance of currency funds 2. Bill receivable Summary 2008-12-31 2007-12-31 Bank acceptance 700,000.00 500,000.00 Trade acceptance --- --- 60 Total 700,000.00 500,000.00 3. Accounts receivable (1). Accounts receivable at different levels are as follows: 2008-12-31 Book balance Provision for bad debts Items Proportion Proportion Amount Amount （%） （%） Receivables with large individual amount. 2,585,375.05 19.22% 129,268.80 1.72% Receivables without large individual amount, but with great risk after combined according to risk characteristics 1,811,334.89 13.46% 1,811,334.89 24.07% Other minor receivables 9,057,002.53 67.32% 5,586,007.17 74.21% Total 13,453,712.47 100.00% 7,526,610.86 100.00% 2007-12-31 Book balance Provision for bad debts Items Proportion Proportion Amount Amount （%） （%） Receivables with large individual amount. 32,547,509.34 55.24% 8,791,453.69 67.53% Receivables without large individual amount, but with great risk after combined according to risk characteristics 2,564,427.24 4.35% 2,564,427.24 19.70% Other minor receivables 23,806,205.06 40.41% 1,661,921.49 12.77% Total 58,918,141.64 100.00% 13,017,802.42 100.00% A. Combining with the company's assets and the structure of credit receivables, 1 million or more is the standard to divide individual amount; 61 B. The accounts receivable with small single-item amount that have the sign of impairment as shown by clear evidences are listed as accounts receivable with small single-item amount that have big risks after combination according to risk characteristics. The details are as follows: Reason for Original Provision for Name of debtor value bad debts provision Long-term open account that can Hongkong Silk stocking man 208,616.27 208,616.27 not be recovered Long-term open account that can Mengren Company 154,720.40 154,720.40 not be recovered Long-term open account that can Shu Ya 126,712.53 126,712.53 not be recovered Long-term open account that can Guangzhou Wanjia 108,919.34 108,919.34 not be recovered Long-term open account that can Baijian 89,428.23 89,428.23 not be recovered Long-term open Shenzhen Jinshiji Health product account that can technology Co., Ltd. 77,734.45 77,734.45 not be recovered Long-term open account that can Aoqi 74,596.86 74,596.86 not be recovered Long-term open account that can Shenzhen Wanjia Store Co., Ltd. 68,817.23 68,817.23 not be recovered Long-term open account that can WAL MART (China) investment Co., Ltd. 63,191.70 63,191.70 not be recovered Long-term open account that can Shantou Shengping Air travel Company 60,074.00 60,074.00 not be recovered Long-term open account that can Li Jinta 58,558.00 58,558.00 not be recovered Long-term open account that can Other Sporadic 719,965.88 719,965.88 not be recovered 62 Total 1,811,334.89 1,811,334.89 (2). By aging, accounts receivable are as follows: December 31, 2008 December 31, 2007 Amount Proportion Provision for bad Amount Proportion% Provision for Age % debts bad debts Within 1 year 6,182,880.52 45.96% 307,108.97 47,362,825.62 80.38% 2,743,814.92 1-2 years 2,089,186.64 15.53% 2,037,856.58 5,879,433.72 9.98% 5,252,845.52 2-3 years 2,652,237.03 19.71% 2,652,237.03 3,457,576.50 5.87% 2,846,434.78 Over 3 years 2,529,408.28 18.80% 2,529,408.28 2,218,305.80 3.77% 2,174,707.20 Total 13,453,712.47 100.00% 7,526,610.86 58,918,141.64 100.00% 13,017,802.42 (3). The amount of top five debtor was RMB 5,397,312.63, accounting for 40.12% of the total, RMB 5,397,312.63 within one year, accounting for 40.12%. (4). In the receivables at the period end, no loans of the shareholders holding 5% (inclusive of a 5%) or more voting right and other related units. (5) .Because the change of merger scope, the accounts receivable had a big change. 4. Other receivables (1). Other receivables at different levels are as follows: December 31, 2008 Book balance Provision for bad debts Items Proportion Proportion Amount Amount （%） （%） Receivables with large individual amount. 34,866,549.51 87.60% 6,335,361.02 79.88% Receivables without large individual amount, but with 995,781.80 2.50% 995,781.80 12.55% great risk after combined according to risk 63 characteristics Other minor receivables 3,938,949.04 9.90% 600,276.77 7.57% Total 39,801,280.35 100.00% 7,931,419.59 100% December 31, 2007 Book balance Provision for bad debts Items Proportion Proportion Amount Amount （%） （%） Receivables with large individual amount. 34,975,226.10 87.04% 16,124,847.71 91.76% Receivables without large individual amount, but with great risk after combined 791,199.06 1.97% 791,199.06 4.50% according to risk characteristics Other minor receivables 4,414,035.05 10.99% 656,666.28 3.74% Total 40,180,460.21 100.00% 17,572,713.05 100% A. Combining the company's assets and credit of receivables, RMB 0.5 million or more was the standard for the division of individual major amount; B. The detailed items of other receivables with big single amount and special provision for bad debts as follows: Amount of Debtor Book balance provision for Reasons bad debt Hongkong Dahong International Co., Ltd. In long-term loss, 2,340,325.59 2,340,325.59 negative net asset Total 2,340,325.59 2,340,325.59 C. The accounts receivable with small single-item amount that have the sign of impairment as shown by clear evidences are listed as accounts receivable with small single-item amount that have big 64 risks after combination according to risk characteristics. The details are as follows: Provision for bad Reason for provision Name of debtor Original value debts Xing Zhenhua Long-term open 65,000.00 65,000.00 account that can not be recovered Textile industry & Trade Long-term open Company 116,285.83 116,285.83 account that can not be recovered Long-term open Tan Wenxiong 132,310.09 132,310.09 account that can not be recovered Long-term open Other Sporadic account that can not be 682,185.88 682,185.88 recovered Total 995,781.80 995,781.80 (2) Other accounts receivable by aging are as follows December 31, 2008 December 31, 2007 Amount Proportion% Provision for bad Amount Proportion Provision for Age debts % bad debts Within 1 year 23,269,425.60 58.46% 1,163,471.28 34,687,928.43 86.33% 13,254,568.80 1-2 years 1,926,848.30 4.84% 192,684.83 549,446.60 1.37% 112,758.36 2-3 years 10,844,387.88 27.25% 2,974,771.52 969,473.10 2.41% 397,871.86 Over 3 years 3,760,618.57 9.45% 3,600,491.96 3,973,612.08 9.89% 3,807,514.03 Total 39,801,280.35 100.00% 7,931,419.59 40,180,460.21 100.00% 17,572,713.05 (3). The amount of top five debtor was RMB 32,701,750.81, accounting for 82.16% of the total, 20,851,085,00 within 1 year, accounting for 52.39%, 2 to 3 years was RMB 9,150,000.00 accounting for 22.99; Over 3 years was RMB 2,340,325.59, accounting for5.88% of the total; (4). In the receivables at the period end, no loans of the shareholders holding 5% (inclusive of a 5%) or more voting right. 5. Prepayments Age Structure 2008-12-31 2007-12-31 within 1 year 9,984,762.06 12,515,849.32 Over 1 years 335,848.86 407,766.26 65 Total 10,320,610.92 12,923,615.58 By December 31, 2008, in the balance of payments in advance , no loans held by the shareholders holding 5% (inclusive of a 5%) or more voting right; 6. Inventory 2007-12-31 2007-1-1 Book balance Provision for Book balance Provision Inventory types devaluation for devaluation Raw materials 8,084,965.26 3,463,110.66 22,729,987.46 1,651,990.31 Processing products 1,201,868.25 306,726.86 12,304,949.34 3,189,344.21 Finished products 8,006,633.46 2,567,523.18 19,217,106.75 7,276,938.37 Commissioned goods 2,652,790.96 2,385,385.37 3,511,034.63 2,468,043.69 Consumables 966,640.85 21,088.48 1,808,929.69 601,375.91 Total 20,912,898.78 8,743,834.55 59,572,007.87 15,187,692.49 (1). Methods for drawing provision for devaluation are described in Note 4. (2). Inventory has great changes, the mainly reason to change the result of the merger . 7. Disposable financial asset Losses and The gains from the accumulated The current change fair value depreciation Amount at of fair value change accounted in period of the current included in the current Amount at Items beginning period equity period period end Stock investment 21,573,000.00 10,063,970.42 10,.345,279.11 778,865.71 41,203,383.82 Total 21,573,000.00 10,063,970.42 10,.345,279.11 778,865.71 41,203,383.82 (1) The sale restriction on 8,457,118 negotiable shares of Shenzhen Victor Onward Textile Industrial Co., Ltd. held by the Company was terminated in current period, which caused big increase in financial assets available for sale at the end of period; (2) The Company took the transaction price in open market as the valuation basis of stock investment among financial assets available for sale. 8. Long term share equity investment. 2008-1-1 2008-12-31 66 Items Amount Provision Increase Decrease in Amount Provision for in the the current for impairment current period impairment period Stock invest ment 31,312,695.43 14,831,681.50 --- 10,063,970.42 21,248,725.01 14,831,681.50 Joint enterp rise 6,798,126.74 --- 504,140.08 7,302,266.82 266,654.99 Associ ated enterp rise 6,531,785.96 --- 54,228,995.24 4,877,467.35 55,883,313.94 --- Other investment 48,674,509.97 23,612,610.61 27,461,196.67 9,075,100.92 67,060,605.72 23,785,453.00 Total 93,317,118.10 38,444,292.11 82,194,331.99 24,016,538.69 151,494,911.40 38,883,789.49 （1） Name of joint enterprise and main financial information. Ratio of Total of voting Net profit Share Total at business right of of the Nature ratio the period income in Name of the units Register the current of held by end the invested ed place company period business the (RMB’000 current in the (RMB’000 company 0) period(RM unit 0) B’0000) invested Shenzhen Trademark Shenzhen Service 50.00% 50.00% 640.32 151.00 73.80 Factory Co. Ltd. industry Shenzhen Xieli Shenzhen Manufactur 50.00% 50.00% 608.52 128.49 27.02 Automobile Co., Ltd. ing （2）Name of Associated enterprise and main financial information. Ratio of Total of voting Net profit Share Total at business right of of the ratio the period income in Name of the units Register Nature of the current held by end the invested ed place business company period the (RMB’000 current in the (RMB’000 company 0) period(RM unit 0) B’0000) invested Shenzhen Changlianfa Shenzhen Service 40.25% 40.25% 411.01 55.52 -14.42 Printing and dyeing industry Company 67 Ratio of Total of voting Net profit Share Total at business right of of the ratio the period income in Name of the units Register Nature of the current held by end the invested ed place business company period the (RMB’000 current in the (RMB’000 company 0) period(RM unit 0) B’0000) invested Jordan Garnent Factory Jordan Manufacturin 35.00% 35.00% USD-1.12 USD556.69 USD-189.74 g Hengshun （ Cypriot ） Cypriot Manufacturin 35.00% 35.00% USD-1.90 --- --- Industry Co., Ltd. g Shenzhen Shenfang Lekai Shenzhen Polarizer, LCD-related materials and devices 47.95% 47.95% 11,298.68 13,165.79 938.57 （3）Details of stock investments are as follows. Units invested Type Amount Proportion December 31,2008 Shenzhen Jintian Industry Co., Ltd. Legal 12,274,497 4.00% 14,831,681.50 person shares Shenzhen Victor Onward Textile Legal 5,365,251.00 3.17% 6,417,043.51 Industrial Co., Ltd. person shares Total 21,248,725.01 The limit sale of RMB 8,457,118 shares of Shenzhen Victor Onward Textile Industrial Co., Ltd. held by the Company were canceled, and were converted to the financial assets for sale. （4）Investments accounted according to method of equity are as follows Balance at Increase in Decrease in Balance at Ratio Original period the current the current the period held investment beginning period. period. end Shenzhen Trademark Factory Co. Ltd. 50% 2,040,102.73 3,623,960.42 369,054.73 3,993,015.15 Shenzhen Xieli Automobile Co., Ltd. 50% 1,529,483.67 3,174,166.31 135,085.36 3,309,251.67 Shenzhen Changlianfa Printing and dyeing Company 40.25% 2,524,500.00 1,712,551.86 58,233.15 1,654,318.71 Jordan Garnent Factory 35.00% 7,240,625.00 4,819,234.20 4,819,234.20 - Hengshun（Cypriot） Industry Co., Ltd. 35.00% 8,228,350.00 --- - 68 Shenzhen Shenfang Lekai 47.95% 40,500,000.00 54,228,995.24 54,228,995.24 Total 62,913,061.40 13,329,912.69 54,733,135.33 4,877,467.35 63,185,580.67 （5）Investments accounted according to method of Cost are as follows Ratio Balance at Increase in Decrease in Balance at held Original period the current the current the period investment beginning period. period. end Shenzhen Jiafeng Textile Co., Ltd. 10.80% 16,800,000.00 16,800,000.00 --- -- 16,800,000.00 Shenzhen Guanhua Prnting and dyeing Co., Ltd. 45.00% 5,491,288.71 5,491,288.71 --- -- 5,491,288.71 Shenzhen Union Textile Group Co., Ltd. 2.87% 2,600,000.00 2,600,000.00 --- --- 2,600,000.00 Shenzhen Xiangjiang Leather Produce Co., Ltd. 20.00% 160,000.00 160,000.00 --- --- 160,000.00 Shenzhen Xinfang Knitting Co., Ltd. 20.00% 524,000.00 524,000.00 --- --- 524,000.00 Hongkong Yehui International Co., Ltd. 17.85% 2,392,914.37 2,392,914.37 --- --- 2,392,914.37 Shenzhen South Textile Co., Ltd. 9.80% 1,500,000.00 1,500,000.00 --- --- 1,500,000.00 Shenzhen Tongyi Simian Co., Ltd. 18.00% 1,800,000.00 1,800,000.00 --- --- 1,800,000.00 Shenzhen Huadong Electronic Co., Ltd. 50.00% 8,906,070.41 10,918,255.05 --- 7,776,563.79 3,141,691.26 Shenzhen Dailisi Knitting Co., Ltd. 30.00% 532,062.50 2559856.26 --- --- 2559856.26 Hongkong Dahong International Co., Ltd. 100.00% 10,600.00 1,451,653.84 --- -- 1,451,653.84 Shenzhen Fengsheng Costume Co., Ltd. 100.00% 4,123,077.16 1,778,004.61 --- --- 1,778,004.61 Anhui Huapeng Textile Co., Ltd 50.00% 25,000,000.00 -- 26,010,209.50 600,000.00 25,410,209.50 Shenzhen Jingguang 70.00% 5,040,000.00 -- 1,450,987.17 --- 1,450,987.17 Shenzhen Fenghua 75.00% 6,322,500.00 698,537.13 --- 698,537.13 -- Total 48,674,509.97 27,461,196.67 9,075,100.92 67,060,605.72 A. The company held shares of Zhenzhen Huadong Electronics Co., Ltd. , Shenzhen Dalice Knitting Co., Ltd and Anhui Huapeng Textile Co., Ltd. respectively 50.00%,30.00% and 50.00%, because the Three companies have been contracted by other shareholders, the company adopted the method of cost 69 accounting; B. The company held shares of Shenzhen Guanhua Printing and dyeing Co., Ltd. 45%, because the company has stopped its business for a long time, therefore, the company adopted the method of cost accounting and drew the provision for devaluation. （6）Provision for impairment of long-term investments December Increase Transfer December Units invested 31,2007 in the in or other 31,2008 Reasons current transfer period out in the current period Shenzhen Jintian Industry Co., 14,831,681.50 --- --- 14,831,681.50 The company's Ltd. net assets were negative Shenzhen Jiafeng Textile 16,800,000.00 -- -- 16,800,000.00 The company is Co., Ltd. being liquidating Shenzhen Guanhua Prnting 5,058,307.01 --- --- 5,058,307.01 The and dyeing Co., Ltd. company is being liquidating Hongkong Dahong 1,451,653.84 --- --- 1,451,653.84 Enter liquidation program International Co., Ltd. Shenzhen Fengsheng 25,535.56 --- --- 25,535.56 Notes 1 Costume Co., Ltd. Shenzhen Fenghua Ribbon 277,114.20 Stock equity has Co., Ltd. been cancel after verification in the report 277,114.20 --- period. Shenzhen Jingguang --- --- Enter liquidation 449,866.59 449,866.59 program Shenzhen Xieli --- 266,654.99 --- 266,654.99 Note 2 Total 38,444,292.11 716,521.58 277,114.20 38,883,699.49 1. The company had recovered the related assets, and the Company had lost the actual control right. had accounted provision for impairment according to the difference between the assets recovered and the book balance of long-term equity investment; 2. The operating period will expire, the both parties had not reached cooperation agreement, and the provision for impairment for the goodwill was accounted. 9. Investment real estate 70 Increase in Decrease in December December the current the current 31 ,2008 Type Dec.31,2007 period period 220,630,160.65 1. Total original price 218,377,280.65 2,252,880.00 --- House , Building 213,017,448.78 2,252,880.00 --- 215,270,328.78 Land Use right 5,359,831.87 --- --- 5,359,831.87 II.Total accumulated depreciation and 77,813,901.22 71,902,371.22 6,005,916.11 --- accumulated amortization House , Building 71,029,459.46 5,383,116.48 --- 76,412,575.94 Land Use right 872,911.76 528,413.52 --- 1,401,325.28 III.Total of accumulated provision for devaluation of --- --- --- --- investment real estate. House , Building --- --- --- --- Land Use right --- --- --- --- IV.Total book value of investment real 146,474,909.43 --- --- 142,816,259.43 estate House , Building 141,987,989.32 --- --- 138,857,752.84 Land Use right 4,486,920.11 --- --- 3,958,506.59 1. In the current period, the constructing project was completed and accepted and transferred as investment real estate RMB 2,115,480.00 2. In the current period, the investment real estate of the Company used for loan mortgage was described in Note VII, 16. 71 10.Fixed assets The Decrease in December 31, consolidation Increase in the December 31, Items the current 2007 scope of change current period 2008 period out 1. Total original price 301,828,259.05 152,693,995.80 3,046,227.44 6,838,956.19 145,341,534.5 House , Building 91,923,738.08 30,369,797.10 540,935.80 --- 62,094,876.7 Fixed assets Fitment 11,414,491.01 --- --- --- 11,414,491.0 Machinery equipment 177,611,182.92 110,483,543.18 1,630,821.00 5,011,785.58 63,746,675.1 Transportations 5,298,085.98 1,785,294.00 554,933.00 1,302,637.13 2,765,087.8 Electronic and Other 15,580,761.06 10,055,361.52 319,537.64 524,533.48 5,320,403.7 II. Total of accumulative depreciation 118,804,769.94 62,674,453.77 7,642,334.61 5,714,080.20 58,058,570.5 House , Building 22,591,930.81 2,099,510.04 2,257,813.05 --- 22,750,233.8 Fixed assets Fitment 4,273,789.39 1,141,449.12 5,415,238.5 Machinery equipment 80,282,412.38 54,926,309.63 3,644,757.72 4,287,128.57 24,713,731.9 48 The Decrease in December 31, consolidation Increase in the December 31, Items the current 2007 scope of change current period 2008 period out Transportation 3,077,920.08 1,172,010.39 296,292.42 1,008,154.49 1,194,047.6 Electronic and Other 8,578,717.28 4,476,623.71 302,022.30 418,797.14 3,985,318.7 III. Amount of 233,529.00 impairment 1,328,678.43 2,819,269.38 548,425.20 3,365,993.6 IV.Book value of Fixed assets 181,694,810.68 --- --- 83,916,970.3 House , Building 69,331,807.27 --- --- 38,215,408.3 Machinery equipment 96,307,026.85 --- --- 37,092,271.1 Transportation 1,921,902.72 --- --- 1,299,306.4 Electronic and Other 6,993,372.22 --- --- 1,310,731.8 49 (1) The company has no temporarily idle fixed assets (2) The completed project under construction converted to fixed assets RMB 111,329.80 . (3). The ownership of fixed assets of the Company is unrestricted, the mortgage loans in the current period described are in Note VII,16; 11. Project under construction Transfer Increas red to Bud fixed get e in the asset in Other Proje Capi (RM the Investment items ct tal B’ current The December 31, Consolidation current real transfer December 31, progr sour 000 scope change Projects 2007 period transfer period estate red out 2008 ess% ce 0) Longgang Industrial Area dormitory 2,024,389.58 28,584,007.52 --- --- --- 59,232.23 30,549,164.87 85% Self 3700 Shenfang building corridor modificati on works 2,115,480.00 2,115,480.00 --- 100% Self --- Dyeing and finishing equipment installati on 2,124,674.42 --- 2,124,674.42 --- --- --- --- --- --- --- Polarizer Project II 690,909.40 --- 690,909.40 --- --- --- --- --- --- --- Other small works 119,746.00 88704.8 111,329.80 97,121.00 --- Self --- Total 30,788,192.32 2,815,583.82 111,329.80 2,115,480.00 59,232.23 4,959,719.40 30,646,285.87 (1). Capitalization of the project under construction in the current period without interest; (2) The project under construction of the company does not exist the impairment produced by the influences by risks from middle-term stop or declaration of waste. 12. Intangible assets 48 Increase in the The Consolidation scope Decrease in the Item December 31, 2007 current period change transfer current period December 31, 20 1. Total original price 21,485,570.20 --- 11,825,200.00 2,153,379.60 7,506,990 Land Use right 9,660,370.20 --- 2,153,379.60 7,506,990 Proprietary technology 11,825,200.00 --- 11,825,200.00 --- II. Total amount of accumulated amortization 9,262,441.76 478,211.55 6,306,400.00 1,841,498.71 1,592,754 Land Use right 2,956,041.76 478,211.55 1,841,498.71 1,592,754 Proprietary technology 6,306,400.00 --- 6,306,400.00 --- III.Total value of provision for impairment --- --- --- IV. Book value of intangible assets 12,223,128.44 --- --- 5,914,236 Land Use right 6,704,328.44 --- --- 5,914,236 Proprietary technology 5,518,800.00 --- 5,518,800.00 --- There was no situations that result in the predicted value smaller than the book value due to the price decline, backward technology, on legal protection and other risk factors. Therefore, there were no prevision for impairment of intangible assets. 13. Goodwill Items Net assets can Acquisition Price paid Recognized Provision be identified ratio goodwill for bad debts Shenzhen Beauty 32,115,324.60 52% 18,867,400.00 2,167,431.21 2,167,431.21 Century Garment Co., Ltd Shenzhen Shenfang 7,387,339.99 51% 3,849,700.00 82,156.61 82,156.61 Import and Export Co., 49 Ltd. Total -- 2,249,587.82 2,249,587.82 The impact from financial crisis on the textile industry and the the import and export industry was continuing, resulting in the loss of Shenzhen Beauty Century Garment Co., Ltd. in 2008, and the profitability of Shenzhen Shenfang Import and Export Co., Ltd. continued to decline. The goodwill from the purchase of shares may not bring income for the company, so the full provision from impairment was accounted in the current period. 14. Long-term amortization expenses Amortization Other Increase in in the transfer Items 2007-1-1 the current 2007-12-31 current period period Decoration costs 1,597,591.75 --- 559,400.58 --- 1,038,191.17 Total 1,597,591.75 --- 559,400.58 --- 1,038,191.17 15. Deferred income tax assets Items of deferred income tax December 31, 2008 December 31,20071-1 assets 1.Provision or bad debt1 1,165,280.11 3,007,627.41 2. Provision for devaluation of inventory 581,047.69 644,140.97 3. Provision for impairment of fixed assets --- 35,029.35 4. Provision for Long-term equity investment 888,659.76 --- Total 2,634,987.56 3,686,797.73 16. Short-term borrowings Items Currency 2007-12-31 2008-12-31 50 Amount of Transferred to Amount of Transferred to original RMB original RMB currency currency Mortgage RMB 94,500,000.00 94,500,000.00 46,000,000.00 46,000,000.00 Mortgage Euro 887,300.00 9,112,393.54 --- --- Guarantee RMB borrowing 2,000,000.00 2,000,000.00 --- --- Total --- 105,612,393.54 --- 46,000,000.00 （1） As of December 31, 2008, the Company had no overdue bank borrowings. （2） Short-term borrowings at the period end as belows: Creditor Name Amount Contract Date of Due Date Terms Interest Rate Borrowing Bank of China Shenzhen Branch 34,000,000.00 6.723% 2008-3-7 2009-3-6 Mortgage Guangdong Development Bank Shenzhen Xiangmihu Branch 12,000,000.00 6.138% 2008-11-27 2009-11-26 Mortgage Total 46,000,000.00 --- （3） On December 31,2008，Information on the main mortgage assets:： Name of mortgage Area (square The bank for the mortgage meters) Baseroom of Shenfang Building, and the 1-6 ,18,19.20.22 and 25,048.82 Bank of China .Shenzhen Branch 23 floor of the general building C-901、C-902, Nanyang Building 170.43 Bank of China .Shenzhen Branch The first floor of Building One, 13, Fenghuang Road 1,032.29 Bank of China .Shenzhen Branch The first floor, Building 3, 8th yard, Tianbe Second Road 537.23 Bank of China .Shenzhen Branch SFDZD2000246015, C1-C5 Shenfang No. 2 Real Estate, Guangdong Development Building 820, warehouse in Baoan North Road, Louhu, Bank .Shenzhen Xiangmihu Shenzhen Branch 51 17.Account payable Age 2008-12-31 2007-12-31 Within 1 year 16,827,929.54 32,273,486.18 1-2 years 96,260.56 2,479,284.10 2-3 years 783,639.58 397,363.33 Over 3 years 1151197.73 944,394.52 Total 18,859,027.41 36,094,528.13 （1）As of December 31,2008， In the balance of accounts payable, there were no payables to shareholders holding 5.00% (including 5.00%) or more of the voting right of the Company; (2). The payables at the period end are normal procurement borrowings, the other payables which are longer than 1 year, mainly due to the individual amount reduced, the suppliers have not provided invoices, so it belongs to normal transaction. On account of the principle of caution, the company has suspended the payables. （3）The change of merger scope leaded to the great change in accounts payable; 18. Received in advance Age 2008-12-31 2007-12-31 Within 1 year 10,565,031.59 4,830,729.00 1-2 years 674,285.99 33,626.25 2-3 years --- 3,890.00 Over 3 years 236,327.18 238,141.18 Total 11,475,644.76 5,106,386.43 (1)As of December 31,2007，In the balance of funds received in advance, there were no funds of shareholders holding 5.00% (including 5.00%) or more of the voting right of the Company; (2) Because some advance receivables were received in the current period, the goods were sent out yet, resulting in the big increase in advance receivables at period end. 19.Employee salary The Amount drown Decrease in Consolidation Items 2007-12-31 in the current the current 2008-12-31 scope change period period transfer 1.Wages, bonuses, allowances and subsidies 7,591,203.75 30,262,720.71 1,941,064.92 27,521,085.05 8,391,774.49 2.Employee welfare --- 3,629,928.60 --- 3,629,928.60 --- 3.Social insurance premiums 343,019.36 4,303,638.11 --- 4,227,896.91 418,760.56 52 The Amount drown Decrease in Consolidation Items 2007-12-31 in the current the current 2008-12-31 scope change period period transfer Of Which: medical insurance --- 799,832.48 --- 799,832.48 --- Basic old-age insurance premiums 343,019.36 1,987,055.44 --- 1,911,314.24 418,760.56 Pension Payment --- 1,357,899.33 --- 1,357,899.33 --- Unemployment insurance --- 50,310.01 --- 50,310.01 --- Work injury insurance --- 64,027.13 --- 64,027.13 --- Maternity insurance --- 44,513.72 --- 44,513.72 --- 4.Public reserves for housing 2,931.00 7,989.56 2,931.00 7,989.56 --- 5.Union funds and staff education fee 816,598.51 648,077.64 451,902.38 595,246.99 417,526.78 6.Compensation for cancellation of labor relations 132,924.00 92,523.89 --- 92,523.89 132,924.00 7.Other --- 17,280.00 --- 17,280.00 --- Total 8,886,676.62 38,962,158.51 2,395,898.30 36,091,951.00 9,360,985.83 20.Tax Payable Taxed 2008-12-31 2007-12-31 50,006.95 VAT -4,755,929.00 419,765.17 Business Tax 311,624.92 3,491.06 City Construction tax 19,528.54 614,693.43 Enterprise Income tax 5,542,081.42 77,739.76 House property Tax 128,966.23 354,285.64 Individual Income tax 423,378.05 Other tax 137,784.11 274,297.52 Total 1,657,766.12 1,943,947.68 53 21.Dividend Payable Name 2008-12-31 2007-12-31 Shenzhen Investment 5,000,000.00 10,000,000.00 Management Co., Ltd. 22.Other payable Age 2008-12-31 2007-12-31 Within 1 year 13,585,532.94 15,200,547.02 1-2 years 4,412,150.23 17,169,913.67 2-3 years 11,135,824.92 4,670,827.27 Over 3 years 19,300,104.23 24,711,421.64 Total 48,433,612.32 61,752,709.60 （1）As of December 31,2008，In the balance of funds received in advance, there were no funds of shareholders holding 5.00% (including 5.00%) or more of the voting right of the Company; （2）The contacts between the related parties are described in Note 9. 23. The non-current liabilities which will due in 1 year. Items 2008-12-31 2007-12-31 Borrowings which will due in 1 --- year 210, 000.00 24. Special payable Name 2008-12-31 2007-12-31 Shenzhen Finance Bureau 2,000,000.00 2,000,000.00 According to the "Notice on National Development and Reform Commission to the General Office of the textile project management of the special funds" (Faigaiban [2006]2841), on December 22, 2006, the Company received "Textile special" funds RMB 2,000,000.00 from Shenzhen Finance Bureau. 25. Deferred income tax liabilities Items 2008-12-31 2007-12-31 Changes in fair value of 5,776,755.82 3,336,929.28 54 financial assets for sale Deterred income liabilities are determined and are used to reduce public reserves according to the book value of financial assets to be sold and the tax basis at the period end. 26.Stock capital 2007-12-31 Decrease in 2007-12-31 Increase in the Proportion the current Amount current Amount Proportion% % period I. Share with conditional subscription 1.State-owned shares --- --- --- --- --- --- 2.Staee-owned legal person shares 148,721,760.00 60.67% --- 12,256,200.00 136,465,560.00 55.68% 3.Other domestic shares --- --- --- --- --- --- Of which： Domestic legal person shares --- --- --- --- --- --- Domestic natural person shares 47,588.00 0.02% --- --- 47,588.00 0.02% 4.Share held by foreign investors Of which： Foreign legal person shares --- --- --- --- --- --- Foreign natural person shares --- --- --- --- --- --- Total 148,769,348.00 60.69% --- 12,256,200.00 136,513,148.00 55.70% II. Shares with unconditional subscription 1.Common shares in RMB 46,854,652.00 19.11% 12,256,200.00 --- 59,110,852.00 24.11% 2.Foreign shares in domestic market 49,500,000.00 20.19% --- --- 49,500,000.00 20.19% 3.Foregin shares in overseas market --- --- --- --- --- --- 4.Other --- --- --- --- --- --- Total 96,354,652.00 39.31% 12,256,200.00 --- 108,610,852.00 44.30% III. Total of capital shares 245,124,000.00 100.00% 12,256,200.00 12,256,200.00 245,124,000.00 100.00% 27. Capital reserves 55 Item 2007-12-31 Increase in the Decrease in the 2008-12-31 current current period Share premium 50,624,274.23 --- --- 50,624,274.23 Other capital reserve 10,391,867.23 32,264,652.82 24,359,200.25 18,297,319.80 Other 61,016,141.46 62,979,868.12 44,441,372.12 68,921,594.03 In the reporting period, the limit of 8,457,118 shares of Shenzhen Victor Onward Textile Industrial Co., Ltd. held by the company was cancelled, and accounted according to fair value in the financial assets for sale, the changed part of the fair value was included in the public reserve and transferred out to investment income 28. Surplus reserve Items Year 2008 Year 2007 I. Statutory surplus reserve Balance at year beginning 26,179,878.63 24,779,594.34 Increase in this year 4,319,709.75 1,400,284.29 Reduction in this year --- --- Balance at year end 30,499,588.38 26,179,878.63 The increase of surplus reserve in each year was drown from after-tax profit, the profit allocation plans are described in Note 7, 29. 29. Retained profits Items Year 2008 Year 2007 Net profit 44,212,891.08 11,966,190.51 Less： loss and gain of minority shareholders -1,779,666.24 412,090.22 Net profit belonging to the owner of the parent company 45,992,557.32 11,554,100.29 Add：retained profit at the period beginning 31,009,266.53 20,855,450.53 Less： drawing statutory surplus 4319709.75 1,400,284.29 56 Items Year 2008 Year 2007 reserve Less ： payable dividends of ordinary shares --- --- Retained profits at the period end 72,682,114.10 31,009,266.53 The Company draws 10% statutory surplus reserve from after-tax profit according to company constitution. 30. Equity of minority shareholders minority shareholders Companies holding shares 2008-12-31 2007-12-31 Anhui Huapeng Textile Co., Huamao Textile Co., Ltd. Ltd --- 20,808,167.59 Anhui Huapeng Textile Co., Huamao Group Co., Ltd. Ltd --- 5,202,041.90 Shenzhen Shenfang Lekai China Lekai Film Group Co., Ltd. Photoelectron material Co., Ltd. --- 40,404,414.22 Shenzhen Shenfang Lekai Photoelectronic Materials Guotou High-tech Company Co., Ltd. --- 13,468,138.07 Hongkang Dahong Shenzhen Jingguang --- InternationalCo., Ltd. Footwear Co., Ltd 621,851.64 Jiangxi Xuanli Yarn Industry Employees’ equity Co., Ltd --- 1,779,666.24 Total --- 82,284,279.66 As Anhui Huapeng Textile Co., Ltd., Shenzhen Jingguang Footwear Co., Ltd. and Shenzhen Shenfang Lekai Photoelectronic Materials Co., Ltd. did not fall into consolidation scope in current period, relevant minority interests were correspondingly transferred out. 31．Revenues, costs, Gross Items Year 2008 Year 2007 I.Main business income Domestic and foreign trade 246,733,457.70 179,011,335.60 Manufacturing 67,687,882.83 250,745,023.22 Property management, leasing 66,348,219.80 66,138,684.30 57 Internal offset between industries -21,857,165.37 -8,241,599.75 Subtotal 358,912,394.96 487,653,443.37 2.Other Business income --- Income from booth planning 390,000.00 5,240,965.30 Material transfer, electricity 1,226,642.36 Subtotal 5,240,965.30 1,616,642.36 Total 364,153,360.26 489,270,085.73 （2）Business cost Items Year 2008 Year 2007 1. Main business cost Domestic and foreign trade 244,049,383.94 177,507,423.36 Manufacturing 63,546,384.74 210,926,084.43 Property management, leasing 290,584.46 1195200.24 Internal offset -20,851,207.82 -5,894,317.12 Subtotal 287,035,145.32 383,734,390.91 2.Other business cost Material transfer, electricity 5,237,743.72 1,155,034.15 Subtotal 5,237,743.72 1,155,034.15 Total 292,272,889.04 384,889,425.06 （3）Gross and gross rate Items Year 2008 Year 2007 1. Gross profit from main business 71,877,249.64 103,919,052.46 2.Other business profit 3,221.58 461,608.21 Operating Gross profit rate 19.74% 21.33% （4）Total income and the ratio of operating income from top five clients Items Year 2008 Year 2007 Total income from top five 278,481,998.32 242,282,300.00 58 clients The ratio of operating income 76.47% 49.52% （5）Incomes from main business are listed by Area: Main business Year 2008 Year 2007 Domestic business revenue 120,105,037.35 215,592,830.99 Foreign business income 244,048,322.91 273,677,254.74 Internal offset -21,857,165.37 -8,241,599.75 Total 364,153,360.26 489,270,085.73 （6）The Company's sales income decreased mainly because Shenzhen Shenfang Lekai Photoelectronic Materials Co., Ltd. fell out of consolidation scope in current period. 32. Business taxes and surcharges Items Year 2008 Year 2007 Business tax 3,306,819.04 3,282,804.21 City construction tax 83,280.62 341,863.41 Education surcharge 173,985.58 367,393.01 Consumption tax 3,271.21 --- Total 3,567,356.45 3,992,060.63 Main business taxes and additional tax standards are described in note 5. 33. Cost of sales Items Year 2008 Year 2007 Cost of sales 4,562,806.16 5,868,544.87 Including: Wage 787,324.37 567,919.30 Welfare cost 833,303.63 910,226.46 Depreciation expense 1,014,071.27 1,269,441.50 Transportation expresses 8,365.38 334,611.60 Insurance expresses 2,014,001.62 1,331,826.04 Repair fee 116,729.80 130,956.20 59 Items Year 2008 Year 2007 Business hospitality fee 234,324.00 93,186.44 Travel fee 261,969.89 149,476.60 Office expenses 898,897.19 815,670.32 Lease expenses 4,552,000.41 5,763,533.62 Other 5,763,533.62 7,088,462.84 After discounting the changes in the scope of merger, the overall cost of sales had little change. 34.Management Expresses Items Year 2008 Year 2007 Total of Management expresses 53,348,135.78 58,840,282.62 Including: Wage 16,558,669.82 17,681,094.41 Welfare cost 1,310,025.14 -779,885.00 Depreciation expenses 8,310,186.30 8,466,813.80 Travel fee 1,370,930.60 1,895,494.50 Business hospitality fee 1,173,125.40 934,527.70 Tax 2,793,057.70 2,894,324.85 Transport expenses 1,566,537.71 1,770,882.42 Social security expenses 3,842,857.28 6,329,895.92 Housing Accumulation fund --- 477,502.72 Labour union expenses 573,231.22 477,670.25 Employee Education expenses 430,424.40 567,088.19 Litigation expenses 4,325,125.20 2,375,201.00 R& D --- 5,287,117.12 Amortization of Intangible assets 478,211.55 1,394,810.59 Amortization of Long-term 68,981.62 124,292.91 Other 10,546,771.84 8,943,451.24 After deducting the factor of change of consolidation scope, administrative expenses increased by 60 RMB 8.31 million and 18.46% over the previous period mainly due to increase of legal cost for the lawsuit concerning Gangpeng Building. Some administrative expenses decreased due to writeback of provision for welfare expenses payable made at beginning of period after the implementation of new standards for the first time in 2007. 35. Financial costs Items Year 2008 Year 2007 Total financial expenses 3,844,910.11 7,283,913.49 Of which: Interest expense 5,133,986.31 6,091,143.04 Interest income -1,496,398.95 -1,310,565.17 Exchange gains and losses 74,493.29 2,000,124.71 other charges 132,829.46 503,210.91 Because of the RMB exchange rate increased slower over the previous period, the exchange had losses 36．Asset impairment losses Items Year 2008 Year 2007 Bad debt losses -9,009,882.94 22,046,282.67 Inventory devaluation losses 504,786.89 11,261,798.89 Fixed asset impairment losses 2,819,269.38 859,915.81 Long-term equity investment impairment losses 716521.58 1,754,303.60 Goodwill impairment losses 2,249,587.82 --- Total -2,719,717.27 35,922,300.97 Due to recovery of house payment and interest from Chengdu Gangpeng Company in current period, the provision of RMB 12,774,650.00 for impairment made in previous period was written back. As a result, the provision for impairment in current period is negative; 37. Investment income Items Year 2008 Year 2007 Income from the sale of financial assets for 5,194,889.94 40,465,440.16 61 sale Accounting loss and gain adjustment by equity method 127,158.17 -9,226,052.79 Accounting dividend by cost method 4,016,110.41 4,399,018.49 Income from equity disposal -421,422.93 -21,010.00 Other 19,931,066.95 --- Total 28,847,802.54 35,617,395.86 A. As the quantity of shares of Shenzhen Victor Onward Textile Industrial Co., Ltd. sold by the Company decreased and the stock price of Shenzhen Victor Onward Textile Industrial Co., Ltd. fell sharply over the previous period, the investment income from selling financial assets available for sale changed greatly; B. As the investment in Shenzhen Shenfang Lekai Photoelectronic Materials Co., Ltd. was accounted for on equity basis and the equity in Hengshun (Saibai) Industrial Co., Ltd., a joint venture company, was calculated as zero in the previous period, the profit and loss adjustment accounted for on equity basis increased greatly; C. Other item is the profit obtained by the Company according to equity proportion of 50.00% from the assignment of the land located in Zhentouling, Nanling Village, Nanwan Subdistrict, Longgang District, Shenzhen by Shenzhen East China Electronic Co., Ltd., a joint venture operated by another party according to contract, in current period. 38. Non-operating income Items Year 2008 Year 2007 Government Subsidy --- 505,448.75 Income from liquidation of fixed asset 304,840.05 189,329.22 Income of the sale of intangible assets 15,697,658.24 --- Total 7,763,255.45 87,148.97 A.In the report period, the Company assigned the land located in Zhentouling, Nanling Village, Nanwan Subdistrict, Longgang District, Shenzhen, which was co-owned by the Company and Shenzhen 62 East China Electronic Co., Ltd. The Company owned the use right of land with area of 10400 square meters and East China Company owned the use right of land with area of 16200 square meters and house property on the ground. The total assignment price is RMB 107 million. The amount payable to the Company is RMB 35.6725 million. After deduction of tax and relevant expenses, the net income of the Company is RMB 15,697,658.24; B. In the report period, the Company and Chengdu Gangpeng Real Estate Development Co., Ltd. entered into reconciliation agreement in respect of debt lawsuit. The Company recovered interest of RMB 7,117,813.00, which was accounted for as profits or losses for current period. 39. Non-operating expenses Items Year 2008 Year 2007 Disposal of net loss of fixed assets 82,931.30 64,852.40 Donation expenses 382,414.38 --- Fine expenses 73,140.97 16,681.06 Other expenses 3,195.00 16,990.58 Total 541,681.65 98,524.04 40. Income tax expenses Items Year 2008 Year 2007 Total profits 50,627,867.06 17,407,508.77 Current income tax expenses 5,783,716.48 8,353,724.34 Deferred income tax expenses 631,259.50 -2,912,406.08 Total 6,414,975.98 5,441,318.26 Ratio of Current income tax expense to total profits 11.42% 47.99% 41.Minority shareholder gains and loss Name Shareholding Company Year 2008 Year 2007 Anhui Huapeng Textile Co., Huamao Textile Co., Ltd. Ltd --- 414,712.45 Huamao Group Co., Ltd. Anhui Huapeng Textile Co., --- 103,678.12 63 Ltd Shenzhen Hengsheng Shenzhen Shenfang Import InvestmentCo., Ltd. and Export Co., Ltd. --- --- China Lekai Film Group Shenzhen Shenfang Lekai Company Photoelectron material Co., Ltd. --- 3,921,606.43 Shenzhen Shenfang Lekai Photoelectronic Materials Guotou High –tech Company Co., Ltd. --- 1,307,202.14 Hongkong Dahong International Shenzhen Jingguang Co., Ltd. Footwear Co., Ltd --- -1,175,365.86 Jiangxi Xuanli Yarn Industry Employees’ equity Co., Ltd -1,779,666.24 -4,159,743.06 Shenfang Group Organic Shenzhen Beauty Century Trade Union Committee Garment Co., Ltd. --- --- Shenzhen Hengsheng Investment Shenzhen Beauty Century Co., Ltd. Garment Co., Ltd. --- --- Shenzhen Beauty Century Garment Co., Ltd. Union Shenzhen Beauty Century Committee Garment Co., Ltd. --- --- Total -1,779,666.24 412,090.22 42. Other cash paid relating to operating activities Items Year 2008 Year 2007 Business hospitality 1,304,081.60 1,065,483.90 Travel fee 1,407,449.40 1,988,680.94 Insurance premium 452,455.66 693,912.29 Postal communication fee 161,745.97 1,134,350.37 Rental fee 909,703.23 1,013,889.32 Transportation cost 1,014,071.27 1,269,441.50 Transport fares 1,566,537.71 1,770,882.42 Repair fee 2,014,001.62 1,331,826.04 R&D - 5,287,117.12 64 Items Year 2008 Year 2007 Lawsuit cost 4,325,125.20 2,375,201.00 Audit and consultation fee 1,630,600.00 556,600.00 Other 2,598,319.74 8,656,564.86 Total 17,384,091.40 27,143,949.76 43. Other cash received relating to financing activities Items Year 2008 Year 2007 The change of merger scope resulted in the reduction of monetary funds. 30,876,339.01 --- Total 30,876,339.01 --- In current period, Anhui Huapeng Textile Co., Ltd., Shenzhen Jingguang Footwear Co., Ltd. and Shenzhen Shenfang Lekai Photoelectronic Materials Co., Ltd. fell out of consolidation scope. Monetary capital decreased by RMB 30,876,339.01 in total as a result of change of consolidation scope, which was accounted for as other cash payment related to investing activities. 44. Other cash paid relating to financing activities Items Year 2008 Year 2007 Return borrowing to controlling shareholders 2,500,000.00 37,500,000.00 Total 2,500,000.00 37,500,000.00 45. Cash and cash equivalents Items 2008-12-31 2007-12-31 I. Cash 84,022,925.18 124,908,748.97 Of which: Cash in stock 296,028.09 502,271.31 Bank deposits which can be readily available for payment 79,485,101.49 103,381,263.65 Other currencies with designated use 4,241,795.60 21,025,214.01 II. Cash equivalents --- --- Of which: bond investments which will due in --- --- 65 three months III. Balance of cash and cash equivalents at the period end 84,022,925.18 124,908,748.97 Of which: cash and cash equivalents which are limited to use 4,241,795.60 21,025,214.01 Note 8. Notes to main items of financial statements of the parent company 1. Other receivables (1). Other receivables at different levels are as follows: 2008-12-31 Book balance Provision for bad debts Items Proportion Proportion Amount Amount （%） （%） Receivables with large individual amount. 61,986,869.39 95.81% 10,544,456.60 93.06% Receivables without large individual amount, but with great risk after combined according to risk characteristics 181,285.83 0.28% 181,285.83 1.60% Other minor receivables 2,528,546.66 3.91% 605,064.43 5.34% Total 64,696,701.88 100.00% 11,330,806.86 100.00% 2007-12-31 Book balance Provision for bad debts Items Proportion Proportion Amount Amount （%） （%） Receivables with large individual amount. 70,409,556.83 96.56% 15,923,154.63 95.95% 66 Receivables without large individual amount, but with great risk after combined 181,285.83 0.25% 181,285.83 1.09% according to risk characteristics Other minor receivables 2,325,975.35 3.19% 491,623.49 2.96% Total 72,916,818.01 100.00% 16,596,063.95 100.00% A. 500,000 or more as the single amount major standard. B. Details of other receivables with big individual amount which have been drown provision for bad debt are as follows: Provision for Debtor Book balance Reasons bad debt The Company had come to the liquidation Dahong International Company 2,340,325.59 2,340,325.59 procedure. Tianlong Industry and Trade The net asset is Company 800,000.00 500,000.00 negative. The net asset is Jiangxi Xuanli String Company 14,389,044.60 3,091,600.00 negative. Total 17,529,370.19 5,931,925.59 C. The accounts receivable with small single-item amount that have the sign of impairment as shown by clear evidences are listed as accounts receivable with small single-item amount that have big risks after combination according to risk characteristics. The details are as follows: Provision for bad Name of debtor Original value debts Reason for provision Xing Zhenhua Long-term open account 65,000.00 65,000.00 that can not be recovered Light Textile Industrial and Long-term open account Trading Company 116,285.83 116,285.83 that can not be recovered Total 181,285.83 181,285.83 67 (2). Other receivables by aging are as follows: 2008-12-31 2007-12-31 Age Amount Proportion Provision for Amount Proportion Provision for （%） bad debts （%） bad debts Within 1 year 50,426,343.22 77.94% 5,368,464.93 58,916,982.88 80.80% 12,947,771.01 1-2 years 1,306,603.19 2.02% 130,660.32 9,696,641.19 13.30% 108,477.82 2-3 years 9,555,009.19 14.77% 2,866,502.76 851,651.10 1.17% 255,495.33 Over 3 years 3,408,746.28 5.27% 2,965,178.85 3,451,542.84 4.73% 3,284,319.79 Total 64,696,701.88 100.00% 11,330,806.86 72,916,818.01 100.00% 16,596,063.95 (3). The amount of top five debtor was RMB 48,460,561.13, accounting for 74.90% of the total, 36,970,235.54 within 1 year, accounting for 57.14%, 2 to 3 years was RMB 9,150,000.00 accounting for 14.14; Over 3 years was RMB 2,340,325.59, accounting for 3.62% of the total; 2. Long-term equity investment 2007-12-31 2008-12-31 Items Amount Provision Increase in Decrease in the Amount Provision for bad the current current for bad debts debts Stock Invest ment 31,312,695.43 14,831,681.50 --- 10,063,970.42 21,248,725.01 14831,681.50 Subsid iaries 79,560,635.60 --- --- --- 79,560,635.60 2,249,587.82 Joint enterp rise 6,798,126.73 --- 504,140.08 --- 7,302,266.82 266,654.99 Associ ated enterp rise 56,260,295.76 --- 4,500,485.54 4,877,467.35 55,883,313.94 Other investment 72,835,706.64 23,612,610.61 --- 9,075,100.02 63,760,605.62 23,785,363.00 Total 246,767,460.16 38,444,292.11 5,004,625.62 24,016,538.79 227,755,546.99 41,133,287.31 68 （1）Names of joint enterprise and main financial information Ratio of Total voting Total net business Sharehol Net profit right of asset at income of dings of the Register Nature of the the period the Name of units invested ratio of current ed place business company end current the period in the (RMB’0000 period company (RMB’0000) invested ) (RMB unit ‘0000) Shenzhen Trademark Shenzhen Service instrity Co. Ltd. 50.00% 50.00% 640.32 151.00 73.80 Shenzhen Xieli Shenzhen Manufacturin g Automobile Co., Ltd 50.00% 50.00% 608.52 128.49 27.02 (2). Name of associated enterprises and main financial information Ratio of Total voting Total net business Net profit Shareholdi right of asset at income of of the Register Nature of ngs ratio the the period the current Name of units invested ed place business of the company end current period company in the (RMB’000 period (RMB’0000 invested 0) (RMB ) unit ‘0000) Shenzhen Changlianfa Printing and dyeing Shenzhen Service Company instrity 40.25% 40.25% 411.01 55.52 -14.42 Jordan Garment Factory Jordan Manufacturin g 35.00% 35.00% USD-1.12 USD556.69 USD-189.74 Hengshun （ Saipan ） Cypriot Manufacturin Industry Co., Ltd. g 35.00% 35.00% USD-1.90 --- --- Shenzhen Shenfang Shenzhen Polarizer, Lekai Photoelectronic LCD related Materials Co., Ltd. materials and devides 47.95% 47.95% 11,298.68 13,165.79 938.57 (3). Details of Stock investments are as follows Units invested Type Amount Proportion December 31,2008 69 Shenzhen Jintian Industry Co., Ltd. Legal 12,274,497 4.00% 14,831,681.50 person shares Shenzhen Victor Onward Textile Legal 5,365,251 3.17% 6,417,043.51 Industrial Co., Ltd. person shares Total 21,248,725.01 The limit sale of 8,457,118 shares of Shenzhen Victor Onward Textile Industrial Co., Ltd.. held by the Company were canceled, and were converted to the financial assets for sale. （4）Investments accounted by method of equity are listed as follows Ratio Original Balance at Increase in Decrease in Balance at held investmen period the current the current the period t beginning period. period. end Shenzhen Trademark Factory Co. Ltd 50% 2,040,102.73 3,623,960.42 369,054.73 --- 3,993,015.15 Shenzhen Xieli Automobile Co., Ltd. 50% 1,529,483.67 3,174,166.31 135,085.36 --- 3,309,251.67 Shenzhen Changlianfa Printing and dyeing Company 40.25% 2,524,500.00 1,712,551.86 --- 58,233.15 1,654,318.71 Jordan Garnent Factory 35.00% 7,240,625.00 4,819,234.20 --- 4,819,234.20 --- Hengshun（Saipan） Industry Co., Ltd. 35.00% 8,228,350.00 --- --- --- --- Shenzhen Shenfang Lekai Photoelectronic Materials Co., Ltd. 47.95% 40,500,000.00 49,728,509.70 4,500,485.54 54,228,995.24 Total 60,533,577.73 63,058,422.49 5,004,625.62 4,877,467.35 63,185,580.76 （5）Investments accounted by the cost method are listed as follows 70 Ratio Decrease held Balance at Increase in in the Balance at Original period the current current the period investment beginning period. period. end Shenzhen Jinlan Decorative 90.00% Articles Industrial Co., Ltd. 5,470,000.00 5,470,000.00 --- --- 5,470,000.00 Shenzhen Lisi Industrial Co., 90.68% Ltd 6,666,132.60 6,666,132.60 --- --- 6,666,132.60 Shenzhen Beauty 100.00% Century Garment Co., Ltd. 30,867,400.00 30,867,400.00 --- --- 30,867,400.00 Shenzhen Shenfang Import 100.00% and Export Co., Ltd. 6,299,700.00 6,299,700.00 --- --- 6,299,700.00 Shenzhen Huaqiang Hotal 95.00% 14,623,003.00 14,623,003.00 --- --- 14,623,003.00 Shenzhen Shenfang Property 93.75% Management Co., Ltd. 1,600,400.00 1,600,400.00 --- --- 1,600,400.00 Shenzhen Zhongxing Fibre 75.00% Folds Cotton Clothing Ornament Co., Ltd. 1,260,000.00 1,260,000.00 --- --- 1,260,000.00 Jiangxi Xuanli Yarn Industry 63.87% Co., Ltd. 12,774,000.00 12,774,000.00 --- --- 12,774,000.00 Total 79,560,635.60 --- --- 79,560,635.60 （6）Investments accounted by the cost method are listed as follows Ratio Balance at Increase in Decrease in Balance at held Original period the current the current the period investment beginning period. period. end 71 Shenzhen Jiafeng Textile 10.80.% Co., Ltd. 16,800,000.00 16,800,000.00 --- -- 16,800,000.00 Shenzhen Guanhua Prnting and dyeing Co., Ltd. 45.00% 5,491,288.71 5,491,288.71 --- --- 5,491,288.71 Shenzhen Union Textile 2.87% Group Co., Ltd. 2,600,000.00 2,600,000.00 --- --- 2,600,000.00 Shenzhen Xiangjiang 20.00% Leather Produce Co., Ltd. 160,000.00 160,000.00 --- --- 160,000.00 Shenzhen Xinfang 20.00% Knitting Co., Ltd. 524,000.00 524,000.00 --- --- 524,000.00 Hongkong Yehui 17.85% International Co., Ltd. 2,392,914.37 2,392,914.37 --- --- 2,392,914.37 Shenzhen South Textile Co., Ltd. 50.00% 8,906,070.41 10,918,255.05 --- 7,776,563.79 3,141,691.26 Shenzhen Dailisi Knitting 30.00% Co., Ltd. 532,062.50 2,559,856.26 --- --- 2559856.26 Hongkong Dahong 100.00% International Co., Ltd. 10,600.00 1,451,653.84 1,451,653.84 Shenzhen Fengsheng 100.00% Costume Co., Ltd. 4,123,077.16 1,778,004.61 --- --- 1,778,004.61 Shenzhen Fenghua 75.00% Ribbon Co., Ltd. 6,322,500.00 698,537.13 --- 698,537.13 -- Anhu Huapeng Textile Co., Ltd. 50.00% 25,000,000.00 26,010,209.50 -- 600,000.00 25,410,209.50 72 Shenzhen Jingguang Footwear Co., Ltd 70.00% 5,040,000.00 1,450,987.17 -- -- 1,450,987.17 Total 72,835,706.55 --- 9,075,101.02 63,760,605.63 A. The company held shares of Zhenzhen Huadong Electronics Co., Ltd. ,Shenzhen Dalisi Knitting Co., Ltd and Anhu Huapeng Textile Co., Ltd. respectively 50.00% ,30% and 30.00%, because the three companies have been contracted by other shareholders, the company adopted the method of cost accounting; B. The company held shares of Hong Kong Dahong International Co., Ltd, Zhenzhen Fengsheng Costume Co., Ltd. and Shenzhen Fenghua Ribbon Factory Co., Ltd respectively 100%,100% and 75%, because the companies have stopped their business for a long time and have entered liquidation proceedings, therefore, they are not included in the scope of consolidation. B. The company held shares of Shenzhen Guanhua Printing and dyeing Co., Ltd. 45%, because the company has stopped its business for a long time, therefore, the company adopted the method of cost accounting and drew the provision for devaluation. （6）Provision for impairment of long-term investments December Increase in Transfer in December Units invested 31,2007 the current or transfer 31,2008 Reasons period out in the current period The Shenzhen Jintian 14,831,681.50 --- --- 14,831,681.50 company's Industry Co., Ltd net assets were negative The company is Shenzhen Jiafeng 16,800,000.00 --- --- 16,800,000.00 being Textile Co., Ltd. liquidating 73 Shenzhen Guanhua The company is 5,058,307.01 --- --- 5,058,307.01 being Prnting and dyeing Co., liquidating Ltd. Hongkong Dahong The Company had 1,451,653.84 --- --- 1,451,653.84 come to the International Co., Ltd. liquidation procedure. Shenzhen Fengsheng Note 1 25,535.56 --- --- 25,535.56 Costume Co., Ltd. Shenzhen Fenghua Ribbon Shares equity has been 277,114.20 written off in the report Co., Ltd. 277,114.20 --- period Shenzhen Jingguang --- --- The Company had Footwear Co., Ltd come to the liquidation 449,866.59 449,866.59 procedure. Shenzhen Xieli --- --- Note 2 Automobile Co., Ltd. 266,654.99 266,654.99 Shenzhen Beauty Century Note 3 Garment Co., Ltd. Shenzhen Shenfang Imports and Note 3 export Co., Ltd. Total 38,789,988.51 1,754,303.04 --- 38,444,292.11 1. The company had recovered the related assets, and the company was operated by other parties and the equity change procedures were undergoing. The company had accounted provision for impairment according to the difference between the assets recovered and the book balance of long-term equity investment; 2. The operating period will expire, the both parties had not reached cooperation agreement, and the provision for impairment for the goodwill was accounted. 3. For reasons for Shenzhen Beauty Century Garment Co., Ltd.. and Shenzhen Shenfang Import and 74 Export Co., Ltd., please see Note VII, 13. 3. Property Investment Increase in the Decrease in the 2007-18-31 current period current period Type 2007-12-31 I.Cost 1．House, Building 189,163,884.56 --- --- 189,163,884.56 2.self housing renovation 5,359,831.87 2,115,480.00 --- 7,475,311.87 Total 194,523,716.43 2,115,480.00 --- 196,639,196.43 II. Accumulative depreciation 1．House, Building 61,654,841.20 4,639,065.12 --- 66,293,906.32 2.Self housing renovation 872,911.76 528,413.52 --- 1,401,325.28 Total 62,527,752.96 5,167,478.64 --- 67,695,231.60 III. Devalue Provision 1．House, Building --- --- --- --- 2．Land Use right --- --- --- --- IV. Book Value 1．House, Building 127,509,043.36 --- --- 122,869,978.24 2．Land Use right 4,486,920.11 --- --- 6,073,986.59 Total of book value 131,995,963.47 --- --- 128,943,964.83 4.Fixed assets ,Accumulative depreciation and Devalue Provision of fixed assets 75 Increase in the Decrease in the Items 2007-12-31 current period current period 2008-12-31 Fixed assets cost 63,731,390.98 787,529.00 407,051.00 64,111,868.98 House, Building 61,011,156.18 434,731.00 61,445,887.18 Machinery equipment 970,025.00 --- --- 970,025.00 Electronic equipment 817,658.80 12,798.00 --- 830,456.80 Transport equipment 932,551.00 340,000.00 407,051.00 865,500.00 Total Accumulative depreciation 22,800,435.89 2,629,399.26 370,416.41 25,059,418.74 House, Building 21,485,031.47 2,335,246.92 --- 23,820,278.39 Machinery equipment 712,468.65 93,122.40 --- 805,591.05 Electronic equipment 266,024.46 90,464.84 --- 356,489.30 Transport equipment 336,911.31 110,565.10 370,416.41 77,060.00 Devalue Provision 235,233.62 --- --- 235,233.62 Fixed assets cost 40,695,721.47 --- --- 38,817,216.62 House, Building 32,937,057.43 --- --- 32,100,323.79 Machinery equipment 6,905,468.00 --- --- 5,764,018.88 Electronic equipment 257,556.35 --- --- 164,433.95 Transport equipment 595,639.69 --- --- 788,440.00 (1) The company has no temporarily idle fixed assets (2) The ownership of fixed assets of the Company is unrestricted, the mortgage loans in the current period described are in Note 10; 5. Revenues, costs, gross （1）Business income Items Year 2008 Year 2007 1Main business income 76 Items Year 2008 Year 2007 Domestic and foreign trade 1,803,878.28 Property management, leasing 42,441,731.11 41,094,618.94 Subtotal 42,441,731.11 42,898,497.22 2. Other income Other 5,208,404.52 1,148,103.59 Subtotal 5,208,404.52 1,148,103.59 Total 47,650,135.63 44,046,600.81 （2）Business cost Items Year 2008 Year 2007 Main business cost Domestic and foreign trade --- 1,803,072.16 Property management, leasing --- --- Subtotal --- 1,803,072.16 2. Other income --- --- Other 5,208,404.33 1,148,103.61 Subtotal 5,208,404.33 1,148,103.61 Total 5,208,404.33 2,951,175.77 （3）Gross and Gross Rate Items Year 2008 Year 2007 1.Main business gross 42,441,731.11 41,095,425.06 2.Other business gross 0.19 -0.02 Total 42,441,731.30 41,095,425.04 (4). Property management, leasing of the main business costs, such as wages, depreciation, maintenance and other costs of the accounting period, the company failed to separate accounts statements. Note 9. Relationships of related parties and transactions 77 1. The related parties with controlling relationships. (1). Shareholders of the company with controlling relationships Names of associated companies Register Legal Relationship Equity ed place representative with the ratio % company Shenzhen Investment Management Shenzhen Chen Hongbo Major 60.67 Co., Ltd. shareholders of the Company （2）Information of shareholders of the company with controlling relationships Names of Register Legal Registered associated ed place representa Business scope capital companies tive Shenzhen Shenzhen Chen 4000. million Provide guarantee for Investment Hongbo state-owned enterprises; Management Co., manage the state-owned equity Ltd. besides the enterprises supervised by municipal Assets Commission; carry out asset restructure, reform and capital operation; Investment; other business authorized by municipal Assets Commission. （3）Subsidiary with controlling relationships Names of associated companies Register Legal Relationship Equity ed place representati with the ratio % ve company Shenzhen Jinlan Decorative Articles Industrial Shenzhen Zhang Hong Subsidiaries 100.00% Co., Ltd. 78 Names of associated companies Register Legal Relationship Equity ed place representati with the ratio % ve company Shenzhen Lisi Industrial Co., Ltd Shenzhen Zhu Jun Subsidiaries 100.00% Shenzhen Beauty Century Garment Co., Ltd. Shenzhen Wang Bin Subsidiaries 100.00% Shenzhen Textile Imports and exports Shenzhen Wang Bin Subsidiaries 100.00% Co., Ltd. Shenzhen Huaqiang Hotel. Shenzhen Zhu Jun Subsidiaries 100.00% Shenfang Property Management Co., Ltd. Shenzhen Wang Bin Subsidiaries 100.00% Shenzhen Zhongxing Fibre Folds Shenzhen Feng Junbin Subsidiaries 75.00% Cotton Clothing Ornament Co., Ltd. Jiangxi Xuanli Yarn Industry Co., Ltd. Jiangxi Gao Guoshi Subsidiaries 63.87% Shenzhen Fengsheng Textile Co., Ltd Shenzhen Feng Junbin Subsidiaries 75.00% Hongkong Dahong International Co., Ltd. Hongkon Zhang Hong Subsidiaries 100.00% g Shenzhen Fenghua Ribbon Factory Shenzhen Zhou Dadong Subsidiaries 75.00% Co., Ltd. （4）. Existence of related-party control of the registered capital and its changes Name Increase Decrease Balance at in the in the period current current Balance at the beginning period. period. period end Shenzhen Jinlan Decorative 4,000,000.00 --- --- 4,000,000.00 Articles Industrial Co., Ltd. 79 Name Increase Decrease Balance at in the in the period current current Balance at the beginning period. period. period end Shenzhen Lisi Industrial 2,360,000.00 --- --- 2,360,000.00 Co., Ltd Shenzhen Beauty 25,000,000.00 --- --- 25,000,000.00 Century Garment Co., Ltd. Shenzhen Shenfang Import 5,000,000.00 --- --- 5,000,000.00 and Export Co., Ltd. Shenzhen Huaqiang Hotel 10,005,300.00 --- --- 10,005,300.00 Shenzhen Shenfang 1,600,000.00 --- --- 1,600,000.00 Property Management Co., Ltd. Shenzhen Zhongxing Fibre Folds 1,680,000.00 --- --- 1,680,000.00 Cotton Clothing Ornament Co., Ltd. Shenzhen Jingguang Footwear 7,200,000.00 --- --- 7,200,000.00 Co., Ltd Jiangxi Xuanli Yarn Industry Co., 20,000,000.00 --- --- 20,000,000.00 Ltd. Shenzhen Fengsheng Costume HKD6,670,000.00 --- --- HKD6,670,000.00 Co., Ltd. Hongkong Dahong International HKD10,000.00 --- --- HKD10,000.00 Co., Ltd. Shenzhen Fenghua Ribbon Co., HKD11,240,000.00 --- --- HKD11,240,000.00 80 Name Increase Decrease Balance at in the in the period current current Balance at the beginning period. period. period end Ltd. 2. No related-party control of the situation Name Relation Shenzhen Shenhu Knitting Co., Ltd. Affiliated company Hengshun (Saipan）Co., Ltd. Affiliated company Shenzhen Xiangjiang Leatter Product Co., Ltd. Affiliated company Shenzhen Xinfang Knitting Co., Ltd. Affiliated company Hongkong Yehui International Co., Ltd. Affiliated company Shenzhen Changlianfa Printing and dyeing Co., Ltd. Affiliated company Shenzhen Trademark Co. Ltd. Affiliated company Shenzhen Xieli Automobile Co., Ltd Affiliated company Shenzhen Shenfang Lekai Photoelectronic Materials Co., Ltd. Affiliated company 3. Related-party transactions and related contacts Pricing policy The companies associated with the purchase and sale of the company's activities under the contract price (close to the market price) settlement with the company is borrowing money lending activities by contract (close to normal interest rates for bank loans) the interest rate settlement. （2）Trading activities Associated company names / period Amount at current Amount in the same period period of last year Sale of goods 81 Associated company names / period Amount at current Amount in the same period period of last year Shenzhen Tianlong Industry and Trade Co., Ltd. --- 9,490,041.26 Interest charged Shenzhen Shenfang Lekai 360,340.22 Photoelectronic Materials Co., Ltd. （3）Correlated contacts Name 2008-12-31 2007-12-31 Accounts receivable Shenzhen Tianlong Industry and Trade Co., Ltd. 2,532,225.79 Other receivable Shenzhen Xinfang Knitting Co., Ltd. 576,766.15 Shenzhen Tianlong Industry and Trade Co., Ltd. 500,000.00 Other Payable Shenzhen Xinfang Knitting Co., Ltd. --- Shenzhen Changlianfa Printing and dyeing Co., 480,160.47 Ltd. Hongkong Yehui International Co., Ltd. --- Hongkong Dahong International Co., Ltd. 2,569,803.90 Shenzhen Investment Management Co., Ltd. 2,500,000.00 Shenzhen Trademark Co. Ltd. 3,353,868.07 Shenzhen Xieli Automobile Co., Ltd 13,128.00 Note 10. Contingent events As of December 31, 2008, the company had no major contingent events to be disclosed. Note 11. Events after balance sheet date Profit Distribution Preplan : the board will propose a profit distribution preplan for the 82 general shareholders meeting on April 25,2009, details as: the net profit for the parent company is RMB43,197,097.53, 10% of the profit for the parent company for 2008 ( RMB4,319,709.75)， shall be allocated for statutory common reserve fund. With the total share capital on December 31, 2008, i.e., 245,124,000 shares, as the base, cash dividend of RMB 0.50 (including tax) is to be distributed for every 10 shares,this preplan need to be adopted by the general shareholders meeting. 12. Commitment events of the company As of December 31, 2008, the company had no commitment event to be disclosed. Note 13. Additional information 1. Consolidation of non-recurrent loss and gain Items Year 2008 Year 2007 Gain/loss form disposal of non-current assets 21,114,456.93 40,589,916.98 Governmental Subsidy accounted as current gain/loss --- 505,448.75 The fund possession cost collected from non-financial enterprises accounted for as profits or losses for current period 7,478,153.22 --- Switch back of provision for devaluation of account receivable which was singly taken devaluation test 12,774,650.00 --- Other non-operating income and expenditure beside for the above items -26,556.06 -120,820.61 Other items of gains and losses that comply with the definition of non-recurring gains and losses 15,605,941.75 --- Total of Non-recurrent loss and gain 56,946,645.84 40,974,545.12 Less: Income tax 6,623,439.06 6,151,830.20 Minority shareholding gain and losses -23,950.90 Non-recurring gains/losses after deducting of impacton 50,323,206.78 income tax and minority shareholders’ gains/losses 34,846,665.82 .2. Parent Company of non-recurrent loss and gain Items Year 2008 Gain/loss form disposal of non-current assets 20,905,913.59 The fund possession cost collected from non-financial enterprises accounted for as profits or losses for current period 7,478,153.22 83 Items Year 2008 Switch back of provision for devaluation of account receivable which was singly taken devaluation test 12,774,650.00 Other non-operating income and expenditure beside for the above items 121,422.93 Other items of gains and losses that comply with the definition of non-recurring gains and losses 15,605,941.75 Total of Non-recurrent loss and gain 56,886,081.49 Less: Income tax 6,623,439.06 Non-recurring gains/losses after deducting of impacton income tax and minority shareholders’ gains/losses 50,262,642.43 6. Provision for bad debts Decrease in this period Withdrawal Items 2007-12-31 amount in Transfer Transfer-ou 2008-12-31 -in t this period 15,132,48 Provision for bad debts 30,590,515.46 --- 5.01 --- 15,458,030.45 Provision for falling price of inventory 15,187,692.49 6,393,859.96 12,837,717.9 8,743,834.55 Provision for devaluation of Long-term equity investment 38,444,292.11 716,521.58 --- 277,114.20 38,883,699.49 Provision for devaluation of fixed assets 1,328,678.43 2,585,740.38 --- 548,425.20 3,365,993.61 Provision for devaluation of goodwill --- 2,249,587.82 2,249,587.82 15,132,48 13,663,257.3 Total 85,551,178.49 12,412,767.74 68,701,145.92 5.01 0 7.Supplement Information for cash flow statement （1）Supplement information for cash flow statement of consolidation Year 2008 Year 2007 I. Adjusting net profit to cash flow from operating activities Net profit 44,212,891.08 11,966,190.51 Add: Impairment loss provision of assets -2,719,717.27 35,922,300.97 84 Year 2008 Year 2007 Depreciation of fixed assets, oil and gas assets and consumable biological assets 13,586,409.36 22,873,454.20 Amortization of intangible assets 478,211.55 1,464,236.90 Amortization of Long-term deferred expenses 559,400.58 654,306.58 Loss on disposal of fixed assets, intangible assets and other long-term deferred assets -15,711,023.65 --- Loss from Fixed assets Discard 82,931.30 --- Loss of fair value fluctuation on assets - --- Financial cost 3,712,080.65 6,780,702.58 Loss on investment -28,847,802.54 -35,617,395.86 Decrease of deferred income tax assets 703,809.71 -2,936,698.90 Increased of deferred income tax liabilities 2,439,826.54 3,336,929.28 Decrease of inventories 14,276.48 11,595,509.78 Decease of operating receivables 2,122,940.50 -20,029,820.38 Increased of operating Payable 19,934,652.52 -8,559,610.71 Other -9,557,639.54 -3,336,929.28 Net cash flows arising from operating activities 31,011,247.27 24,113,175.67 II. Significant investment and financing activities that without cash flows: --- Liability transfer to capital --- Convertible corporate bond due within 1 year --- Finance leased fixed assets --- III. Net increase of cash and cash equivalents --- Ending balance of cash 84,022,925.18 124,908,748.97 Less: Beginning balance of cash 124,908,748.97 78,863,152.16 Add: Ending balance of cash - --- Less: Beginning balance of cash equivalents - --- Net increase of cash and cash equivalents -40,885,823.79 46,045,596.81 （2）Supplement information for cash flow statement of Parent Company 85 Year 2008 Year 2007 I. Adjusting net profit to cash flow from operating activities Net profit 43,197,097.53 14,002,842.90 Add:Impairment loss provision of assets 1,760,054.42 17,954,548.87 Depreciation of fixed assets, oil and gas assets and consumable biological assets 7,796,877.90 7,246,890.07 Amortization of intangible assets 407,860.11 605,253.24 Amortization of Long-term deferred expenses - Loss on disposal of non0current assets -15,711,023.65 --- Loss from Fixed assets Discard - --- Loss of fair value fluctuation on assets - --- Financial cost 3,157,003.19 --- Loss on investment -27,854,370.25 4,249,444.15 Decrease of deferred income tax assets -228,498.52 -39,056,704.86 Increased of deferred income tax liabilities 2,439,826.54 3,336,929.28 Decrease of inventories - 22,675,055.41 Decease of operating receivables 5,419,339.24 -35,071,833.41 Increase of operating receivables 3,125,244.52 669,203.30 Other -9,557,639.54 -3,336,929.28 Net cash flows arising from operating activities 13,951,771.49 -8,942,293.62 II. Significant investment and financing activities that without cash flows: Liability transfer to capital --- Convertible corporate bond due within 1 year --- Finance leased fixed assets --- III. Net increase of cash and cash equivalents --- Ending balance of cash 35,807,908.88 51,415,565.66 86 Year 2008 Year 2007 Less: Beginning balance of cash 51,415,565.66 36,046,382.20 Add: Ending balance of cash - --- Less: Beginning balance of cash equivalents - --- Net increase of cash and cash equivalents -15,607,656.78 15,369,183.46 87 8．Process of calculating earnings per share (1) Process of calculating consolidated earnings per share Shenzhen Textile (Holdings) Co., Ltd. Supporting Statement of Consolidated Profit and Profit Distribution Statement Financial indicators Return on net assets Earnings pe Fully diluted Weighted average Basic earnings per share Year Year Year Items Year 2008 2007 2008 Year 2007 Year 2008 2007 Operating profit 6.57% 4.60% 7.09% 4.89% 0.11 0.07 Net profit 11.02% 3.18% 11.91% 3.37% 0.19 0.05 Net profit after deducting non-recurring gains and losses -1.04% -6.41% -1.12% -6.80% -0.02 -0.10 Process of calculation: Fully diluted return on equity = Profit for the report period / net assets at the end of period Weighted average return on net assets=P/（Eo+Np/2+Ei*Mi/Mo-Ej*Mj/Mo) 88 Basic earnings per share=P/（So+S1+Si*Mi/Mo-Sj*Mj/Mo) Diluted earnings per share = (P + diluted potential dividend of ordinary shares that has been recognized as expenses * (1-income tax rate) - conversion expenses) /（S0＋S1＋Si*Mi/M0－Sj*Mj/M0+ Notes to signs: Items Year 2008 P：Profit for the report period Np：Net profit for the report period (not including minority gains and losses) 45,992,557.32 Eo：Beginning net assets (not including minority interest) 363,329,286.62 Ei：Net assets increased through new issue in the report period - Ej：Net assets decreased through distribution of cash dividends in the report period - Mi：The number of months from the next month of increase of net assets to the end of the report period - Mj：The number of months from the next month of decrease of net assets to the end of the report period - Mo：Number of months in the report period 12 So：Total number of shares at beginning of period 245,124,000 S1：The number of shares increased through capital surplus capitalization or distribution of stock dividends in the report period - Si：Number of shares increased through new issue in the report period - (The accompanying notes form an integral part of financial statements) Legal representative： Financial controller： The person in change of the financial Dept： 89 （2）Process of calculating parent Company earnings per share Shenzhen Textile (Holdings) Co., Ltd. Supporting Statement of Parent Company Profit and Profit Distribution Statemen Financial indicators Return on net assets Fully diluted Weighted average Basic earnings per share Items Year 2008 Year 2007 Year 2008 Year 2007 Year 2008 Year 2007 Operating profit 6.04% 5.33% 6.51% 0.06 0.10 0.08 Net profit 10.58% 4.47% 11.41% 4.85% 0.18 0.07 Net profit after deducting non-recurring gains and losses -1.73% 4.32% -1.87% 4.69% -0.03 0.06 Process of calculation: Fully diluted return on equity = Profit for the report period / net assets at the end of period Weighted average return on net assets=P/（Eo+Np/2+Ei*Mi/Mo-Ej*Mj/M o) Basic earnings per share==P/（So+S1+Si*Mi/Mo-Sj*Mj/Mo) Diluted earnings per share = (P + diluted potential dividend of ordinary shares that has been recognized as expenses * (1-income ta －Sj*Mj/M0+Number of shares increased by exercising subscription warrants and options) Notes to signs: Items Year 2008 90 P：Profit for the report period Np：Net profit for the report period (not including minority gains and losses) 43,197,097.53 Eo：Beginning net assets (not including minority interest) 357,019,031.39 Ei：Net assets increased through new issue in the report period - Ej：Net assets decreased through distribution of cash dividends in the report period - Mi：The number of months from the next month of increase of net assets to the end of the report period Mj：The number of months from the next month of decrease of net assets to the end of the report period Mo：Number of months in the report period 12 So：Total number of shares at beginning of period 245,124,000 S1：The number of shares increased through capital surplus capitalization or distribution of stock dividends in the report period - Si：Number of shares increased through new issue in the report period - (The accompanying notes form an integral part of financial statements) Legal representative： Financial controller： The person in change of the financial Dept： 91 Note 14. Other important events By the date of the statement, the Company had no other important events to be disclosed. Note 15. Difference adjustment statement of Domestic accounting standards and international accounting standards. According to the Notice of Ministry of Finance Concerning Printing and Distribution of No. 1 Interpretation of Accounting Standards for Business Enterprises and relevant provisions of Cai Kuai Han (2008) No. 60 Document, the difference between data prepared according to domestic accounting standards and international accounting standards in the previous period was removed at the time of report preparation in 2008 and retained earnings at beginning of period re-stated according to international financial report standards were decreased retroactively by RMB 26.882 million. After adjustment, there was no difference between data prepared according to domestic accounting standards and international accounting standards. 92 Attachued IV: Special Statement on the Fund Occupation by the Controlling Shareholder and Other Related Parties of Shenzhen Textile (Holding) Co., Ltd. in 2008 Shen Peng Suo Gu Zhuan ZI[2009]No.154 To all shareholders of Shenzhen Textile (Holding) Co., Ltd.: We accepted entrustment and audited the financial statements of Shenzhen Textile (Holding) Co., Ltd. (hereinafter referred to as "the Company") for 2008 and issued Shen Peng Suo Gu Shen Zi (2009) No.046 unqualified auditor's report on March 25, 2009. In accordance with the requirements of the Circular on Certain Issues Relating to Standardization of Fund Transfer Between Listed Companies and Their Related Parties and Guarantees Provided by Listed Companies issued by China Securities Regulatory Commission and State-owned Assets Supervision and Administration Commission of the State Council (hereinafter referred to as "the Circular"), we rechecked the accompanying summary statement of fund occupation by the controlling shareholder and other related parties of the Company in 2008 (hereinafter referred to as "Summary Statement") It is the responsibility of the Company's management to prepare the Summary Statement according to the requirements of the Circular and guarantee its truthfulness, legality and completeness. We are responsible for making special statement on the Summary Statement. Our rechecking work includes verification of the content of the Summary Statement and relevant content of the Company's financial statements for 2008. Except relevant audit procedure implemented in the audit of the financial statements of the Company for 2008 in respect of transactions with related parties, we did not implement additional audit procedure or other procedures to the data in the special statement. After rechecking, we did not find that the Summary Statement prepared by the Company was inconsistent with relevant content of audited financial statements of the Company for 2008 in all material aspects. In order to better understand the status of fund occupation by the controlling shareholder and other related parties of the Company in 2008, this special statement should be read with audited financial statements. Chinese C.P.A. Shenzhen Pengcheng Certified Public Accountants Co., Ltd. Shenzhen yChina March 25,2009 Hao Shiming Chinese C.P.A.: Wu Cuishi 93 Summary Statement of Fund Occupation by the Controlling Shareholder and Relationship Type of Balance of fund between fund Account title of Accumulative Accumulative Ba fund Name of related occupied at occupation party the Company amount of funds amount of funds fund occupation party beginning of and the for accounting occupied in 2008 repaid in 2008 at en party 2008 Company Controlling shareholder, actual controller and its affiliated Subtotal --- --- --- Related natural persons and the legal persons controlled by them Subtotal --- --- --- Other Joint related Shenzhen Account venture 2,532,225.79 --- 2,532,225.79 persons and Tianlong receivable their Industrial & Joint affiliated Trading Co., Ltd. Other receivable 500,000.00 --- 500,000.00 enterprises venture 94 enterprises Shenzhen Shenfang Lekai Joint Other receivable --- 9,560,340.22 9,5 Photoelectronic venture Materials Co.,Ltd. Shenzhen Joint Other Xinfang Knitting 576,766.15 --- 576,766.15-- venture Receivable Co., Ltd. Subtotal 3,608,991.94 9,560,340.22 3,608,991.94 9,5 Listed Company of Subsidiaries and affiliated enterprised of the Company Subtotal --- --- --- Total 3,608,991.94 9,560,340.22 3,608,991.94 9,5 95